Case Law Details
Mayur Wines Vs NFAC (ITAT Pune)
Introduction: In the recent Mayur Wines Vs NFAC case, ITAT Pune provided significant clarification concerning the deductibility of partnership remuneration under Section 40(b) of the Income Tax Act, 1961. The tribunal, in reversing the order of the National Faceless Appeal Centre (NFAC), emphasised the lack of statutory requirement for the inclusion of the partnership deed with the return of income for claiming the deduction.
Analysis: The appeal by Mayur Wines, a partnership firm in the liquor business, arose following an intimation under Section 154 of the Act that disallowed the remuneration paid to partners totalling Rs.35,76,830/-. The Centralized Processing Center (CPC), Bangaluru, justified this disallowance on the grounds of the absence of the partnership deed with the income return. The ITAT Pune, however, identified this action as unsupported by law, noting that neither the Act nor its Rules stipulate the necessity of the partnership deed for remuneration deductions.
The ITAT order thus serves as a reminder for the tax authorities to base their decisions on explicit statutory provisions, ensuring fair treatment to taxpayers. It also underscores the importance of the correct interpretation of tax laws for an efficient and just taxation system.
Conclusion: The ITAT Pune’s decision in the Mayur Wines Vs NFAC case provides valuable guidance on the legal framework for claiming partnership remuneration deductions. By stressing the lack of a requirement for including the partnership deed with the income return, the tribunal has effectively strengthened the rights of taxpayers and helped in ensuring a fair tax regime.
FULL TEXT OF THE ORDER OF ITAT PUNE
This is an appeal filed by the assessee directed against the order of the National Faceless Appeal Centre, Delhi [‘NFAC’] dated 25.11.2022 for the assessment year 20 17-18.
2. Briefly, the facts of the case are that the appellant is a partnership firm engaged in the business of liquor. The Return of Income for the assessment year 2017-18 was filed on 29.10.2017 declaring a total income of Rs.24,72,386/-. Against the said return of income, an intimation u/s 154 of the Income Tax Act, 1961 (‘the Act’) was issued disallowing the remuneration paid to the partners of Rs.35,76,830/-. On receipt of the information from the CPC, Bangaluru, a rectification application was filed on 16.02.2019 and the same came to be rejected vide order dated 14.05.2019 passed u/s 154 by the CPC, Bangaluru.
3. Being aggrieved by that order, an appeal was filed before the NFAC, who vide impugned order confirmed the action of the CPC, Bangaluru on the ground that the appellant had failed to upload the partnership deed.
4. Being aggrieved, the appellant is in appeal before us in the present appeal.
5. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the allowability of partner’s remuneration u/s 40(b) of the Act in the intimation sent u/s 143(1)(a) of the Act. The CPC, Bangaluru had disallowed the remuneration to the partners merely on the ground that the return of income was not accompanied by the partnership deed. We have carefully gone through the relevant provisions of the Act as well as the Rules, it is nowhere mentioned that in order to allow the claim for deduction of partner’s remuneration, the return of income should be accompanied by the partnership deed and in absence of such requirement under law, this cannot be treated as incorrect claim. Therefore, the CPC, Bangaluru ought not to have disallowed the partner’s remunerations while processing the return of income u/s 143(1)(a) of the Act. Therefore, we direct the CPC, Bangaluru to amend the intimation by deleting the addition on account of partner’s remuneration of Rs.3 5,76,830/-.
6. In the result, the appeal filed by the assessee stands allowed.
Order pronounced on this 24thday of May, 2023.
