Case Law Details

Case Name : M/s. S.B Agencies Vs ACIT (ITAT Calcutta)
Appeal Number : IT Appeal No. 680 (Kol.) of 2012
Date of Judgement/Order : 31/08/2012
Related Assessment Year : 2005-06
Courts : All ITAT

ITAT CALCUTTA BENCH ‘B’

S.B. Agencies

Versus

Assistant Commissioner of Income-tax

IT Appeal No. 680 (Kol.) of 2012
[Assessment year 2005-06]

AUGUST  31, 2012

ORDER

George Mathan, Judicial Member

This is an appeal filed by the assessee against the order of the learned Commissioner of Income-tax (Appeals)-XX, Kolkata, in Appeal No. 513/CIT(A)-XX/Cir-36/2007-08/Kol dated March 6, 2012 for the assessment year 2005-06.

2. Shri R. Mukherjee, LLB, FCA, CA, the learned authorised representative appeared on behalf of the assessee and Shri P. S. Dutta, learned senior Departmental representative appeared on behalf of the Revenue.

3. In the assessee’s appeal the assessee has raised the following grounds of appeal :

1. Dis allowance of remuneration to partner Rs. 1,00,000

a. For that the learned Commissioner of Income-tax (Appeals)-XX has erred in disallowing Rs. 1,00,000 being remuneration paid to Smt. Madhumita Paul (partner).

b. For that Smt. Madhumita Paul (partner) aged about 47 years, a graduate by education, was actively engaged in the activities of the partnership firm with the yearly remuneration of Rs. 2,20,000 being a full time working partner (20 per cent.) with effect from April 1, 2004 vide the deed of partnership which was already put on record before the learned Assessing Officer. This fact was not considered by the learned Commissioner of Income-tax (Appeal)-XX who has arbitrarily disallowed Rs. 1,00,000 on account of partner’s remuneration.

2. For that the assessment is in violation of the principles of natural justice and accordingly your appellant prays to delete the addition upholding the income as per original return.

3. For that your appellant craves leave to add, amend or alter any ground/s on or before the hearing.

4. It was submitted by the learned authorized representative for the assessee that the assessee had paid salary of Rs. 2.20 lakhs to Smt. Madhumita Paul, one of the partners of the assessee- firm with effect from April 1, 2004. It was the submission that the Assessing Officer had restricted the salary paid to Smt. Madhumita Paul at Rs. 36,000. It was the further submission that the learned Commissioner of Income-tax (Appeals) had granted relief of Rs. 1.20 lakhs. It was the submission in the appeal before the learned Commissioner of Income-tax (Appeals) that the dis allowance in respect of salary paid to Smt. Madhumita Paul was fixed at Rs. 1 lakh. It was the submission that no reason has been given for fixing the salary paid to Smt. Madhumita Paul at Rs. 1.20 lakhs. It was the further submission that the statement of Smt. Madhumita Paul has also been taken, wherein it was proved that Smt. Madhumita Paul did know of the operations of the assessee’s business. It was the submission that the salary paid to Smt. Madhumita Paul was liable to be allowed.

5. In reply, the learned senior Departmental representative has vehemently supported the order of the learned Commissioner of Income-tax (Appeals).

6. We have considered the rival submission. A perusal of the assessment order clearly shows that Smt. Madhumita Paul, had been summoned under section 131 of the Act and her statements have been recorded. It is shown in the statements recorded that Smt. Madhumita Paul did do work at the business premises of the assessee firm. However, the Assessing Officer had restricted the salary allowable to Smt. Madhumita Paul at Rs. 36,000. It is also noticed that the Assessing Officer has mentioned that there were discrepancies in her statements recorded under section 131 of the Act. A perusal of the order of the learned Commissioner of Income-tax (Appeals) clearly shows that the learned Commissioner of Income-tax (Appeals) has considered the objections of the Assessing Officer, but looking into the qualification and age factor of Smt. Madhumita Paul restricted the disallowance to Rs. 1 lakh. Here it is noticed that the Assessing Officer and the learned Commissioner of Income-tax (Appeals) has estimated the salary of Smt. Madhumita Paul without considering any comparative case or without laying any foundation for such estimation itself. In the circumstances, we are of the view that there is no ground for restricting the salary paid to Smt. Madhumita Paul at Rs. 1.20 lakhs as against the claim of Rs. 2.20 lakhs. In the circumstances, the Assessing Officer is directed to allow the assessee’s claim of the salary paid to Smt. Madhumita Paul at Rs. 2.20 lakhs per annum. In the circumstances, the appeal of the assessee is allowed.

7. In the result, the appeal of the assessee stands allowed.

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