Case Law Details
ITO Vs Sarsan Developers (ITAT Pune)
Introduction: The case of ITO vs. Sarsan Developers involves an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] dated 13.12.2019 for the assessment year 2014-15. The core issue revolves around the treatment of a payment made to a retiring partner by the assessee firm, Sarsan Developers, and whether it should be classified as capital expenditure. This article provides a detailed analysis of the case and the reversal of the CIT(A) order by the Income Tax Appellate Tribunal (ITAT) in Pune.
Detailed Analysis:
1. Background: Sarsan Developers, a partnership firm engaged in land development, filed its income tax return for the assessment year 2014-15, declaring nil income. The assessing officer completed the assessment, making an addition of Rs. 5,60,73,319. This addition represented a payment made to a retiring partner, Kumar Housing Corporation Limited.
2. Reason for Disallowance: The dispute arose from the treatment of this payment. The assessing officer contended that the amount paid to the retiring partner should be disallowed and treated as capital expenditure, which was added to the closing work-in-progress under section 37(1) of the Income Tax Act, 1961.
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