Case Law Details
Jetkool Exports India Vs National E-Assessment Centre (ITAT Mumbai)
It is an admitted fact that the assessee being a partnership firm was entitled to deduction in respect of the remuneration payable to the partners as per clause 7 of the Partnership Deed. This in turn depends on the provision of Income Tax Act, 1961 which facilitate remuneration pay out allowable for partnership firms. The assessee vide registered partnership deed dated 01.08.2005 was entitled to deduction with regard to the remuneration payable to partners. Since inception, the assessee was bound by the old provisions of section 40(b)(v) of the Act, which subsequently was amended vide Finance Act No.2, 2009 which came into effect from 01.04.2010. The amended provision provide for higher remuneration pay out in case of partnership firms. It is an undisputed fact that the assessee would get the benefit of the amended provision for higher remuneration from 01.04.2010. The only lacuna in the assessee’s claim is that the assessee has failed to execute the supplementary partnership deed immediately after the enactment of the amended provision. It is only on 16.03.2021 that the assessee has executed the supplementary deed of partnership where the modified remuneration payable to working partners was specified. Nevertheless the assessee vide its supplementary deed gave retrospective effect to the modified remuneration as on 01.04.2010, when the amended provision of section 40(b)(v) came into effect. This action of the assessee was not convincing to the A.O. as the lower authorities have alleged it to be a self serving document which was an afterthought subsequent to the issuance of the show cause notice. The moot question here is whether the assessee was entitled to modify remuneration as per the amended provision based on the supplementary deed giving effect retrospectively. For this proposition, we would be placing our reliance on the decision of the Hon’ble Allahabad High Court in the case of CIT vs. Alison Singh & Co. [2013] 358 ITR 458 (All), which was though on a different facts has upheld the validity of the retrospective effect given to a partnership deed based on a subsequent rectification deed. It has held that as the subsequent deed is executed in accordance with the primary deed, there would be no objection in giving retrospective effect to the subsequent deed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), National Faceless Appeal Centre (‘NFAC’ for short) u/s.250 of the Income Tax Act, 1961 (‘the Act’), pertaining to the Assessment Year (‘A.Y.’ for short) 2018-19.
2. The assessee has challenged the addition made u/s. 40(b)(v) of the Act, amounting to Rs.90,27,721/- towards remuneration paid to partners. The assessee has also challenged the grounds of violation of principle of natural justice.
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