ACIT Vs Dhar Construction Company (ITAT Guhati)
ITAT Gauhati held that TDS not required to be deduct by the partnership firm on salary, bonus, commission or remuneration given/ credited to the partner of the firm.
Facts- The case of the assessee was selected for scrutiny through CASS for high ratio of refund to TDS, large value claim of refund and large increase in capital in a year. AO assessed the income by making various disallowance like disallowance u/s 40(b)(v) and 40(a)(ia), disallowance of material consumed for construction, disallowance of labour charges/ salary/ store & spare/ direct expenses/ office expenses etc.
Aggrieved, the assessee preferred an appeal before the ld. CIT(A) and succeeded. Aggrieved, now the Revenue is in appeal before this Tribunal.
Conclusion- Held that since salary, bonus, remuneration or commission are collectively termed as “remuneration” and the remuneration paid during the year is within the permissible limit provided u/s.40(b)(v) of the Act, therefore, we fail to find any infirmity in the findings of the ld. CIT(A).
Further held that Explanation 2 to Section 15 of the Act which includes salary, bonus, commission or remuneration received by partner under the head ‘salary’ and considering the provisions of section 192 of the Act which talks about the salary given u/s. 15 of the Act, thus, we are inclined to confirm the findings of the ld. CIT(A) that there is no requirement under the provisions of the Act for deduction of tax at source by the partnership firm on salary, bonus, commission or remuneration etc or whatever name called given or credited to a partner of a firm.
FULL TEXT OF THE ORDER OF ITAT GAUHATI
The present appeal has been preferred by the revenue against the order dated 23-03-2020 of the Ld. Commissioner of Income-tax (Appeals), [hereinadfter referred to as ‘CIT(A)’], Shillong [hereinafter referred to as ‘CIT(A)’] for the assessment year 2017-18.
2. The revenue has raised the following grounds:-
1. That the Ld. Commissioner of Income Tax (Appeals) erred in deducting that the assessee rightfully claimed commission of Rs. 1.15 Cr. which is undisputedly with the permissible limit u/s. 40(b) (v) of the Income Tax Act, 1961.
2. That the Ld. Commissioner of Incometax (Appeals) while noting that the profit sharing ratio of the three partners being 38:1:1 allowed commission to the 1st partner @ 89.09% which was way excess by 51.08% as noted by the Assessing Officer.
3. That the Ld. Commissioner of Income Tax (Appeals) erred in deducting the fact that the remuneration/commission was correctly distributed/divided amongst the working partners as per partnership deed while ignoring the fact that excessive payment of commission of Rs.51.08% above the profit sharing ratio of 38% is not in consonance with the Partnership Deed
Non-deduction of TDS
1. That the Ld. Commissioner of Income Tax(Appeals) erred in holding that the commission paid to partners shall not be regarded as Salary under Explanation to section 15 of the Act and that provision of Section 192 related to Salary would not be applicable in this case.
2. That the Ld. Commissioner of Income Tax(Appeals) ignored the fact that payment of commission is covered u/s 194H of the Act and as such the assessee was liable to deduct TDS under that Section and as per provisions of section 197(2).
Other Expenses-Material consumed, labour Charge etc.
1. That the Ld. Commissioner of Income Tax(Appeals) erred in deleting Construction expenses, labour charges/Salary, store and spare expenses, other direct expenses, other expenses such as office expenses, travel & conveyance etc. disallowed expenses of Rs.3,62,37,711/ as being based on conjectures & surmises. In doing so, the Ld. Commissioner of Income Tax(Appeals) failed to appreciate that fact that at the time of assessment proceedings the assessee could not produce any evidence/bills, vouchers for such huge expenses claimed. The Assessing Officer while accepting that such expenses are accordable while executing any contract works was not satisfactorily convinced by the assessee who failed to produce any material evidence to substantiate such large claims of expenses of about Rs.70.81 Cr.
2. That the Ld. Commissioner of Income Tax(Appeals) claims that the additions are high pitched in erroneous so much so that the Assessing Officer allowed 96% of such expenses and disallowed only Additions are high pitched in erroneous so much so that the Assessing Officer allowed 96% of such expenses and disallowed only 4% of such expenses as being unsubstantiated.
3. Brief facts of the case are that the assessee is a partnership firm, engaged in construction business. Income of Rs.1,21,98,600/- declared in e-return filed on 16-10-2017 for the AY 2017-18. Case selected for scrutiny through CASS for high ratio of refund to TDS, large value claim of refund and large increase in capital in a year. Valid notices u/s. 143(2) & 142(1) of the Act were issued. Various details were called for by the ld. AO, which the assessee has filed. Income assessed at Rs.4,84,36,311/- after making
