Case Law Details
Kiran Vasant Pawar Vs ITO (ITAT Pune)
Introduction: The Income Tax Appellate Tribunal (ITAT) Pune recently examined a case where the Income Tax department had categorized the remuneration received by a partner as salary income, leading to an addition of Rs. 78,064 to the partner’s income. The case of Kiran Vasant Pawar vs. Income Tax Officer (ITO) is one that sheds light on the misinterpretation of tax provisions, particularly concerning partners’ remuneration.
1. Background of the Case: The appellant, Kiran Vasant Pawar, was engaged in the profession of consulting engineering and was also a partner in various firms. During the relevant assessment year, he reported an income of Rs. 32,33,288 from partnership firms, but after setting off a loss of Rs. 16,92,142 and claiming depreciation of Rs. 11,27,030, he declared an income of Rs. 15,41,145.
2. Audit of Books of Account: The Assessing Officer (AO) noticed that the appellant had not audited his books of account as required by Section 44AB of the Income Tax Act, 1961. As a result, the AO believed that the appellant was obligated to declare income at a flat rate of 8% of the total turnover under Section 44AD of the Act.
3. Questionable Categorization: The issue that became contentious in this case was the categorization of the remuneration received by the appellant as salary income. The AO was of the opinion that since the appellant had not audited his books of account, all expenses incurred were deemed to have been fully accounted for. Consequently, the entire amount received from the partnership firms was added to the appellant’s income.
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