By Jagdish D. Shah, Jagdish T. Punjabi, Chartered Accountants
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Part B — Unreported Decisions
(Full texts of the following Tribunal decisions are available
at the Society’s office on written request. For members desiring that the
Society mails a copy to them, Rs.30 per decision will be charged for
photocopying and postage.)
19 Hitesh D. Gajaria v. ACIT,
11(2)
ITAT ‘H’ Bench, Mumbai
Before J. Sudhakar Reddy (AM) and
P. Madhavidevi (JM)
ITA No. 993/Mum./2007
A.Y. : 2003-04. Decided on : 14-11-2008
Counsel for assessee/revenue : Arvind Sonde/Mayank
Priyadarshi
S. 14A of the Income-tax Act, 1961 (‘the Act’) — Whether
expenditure can be disallowed out of expenses claimed against business income
being remuneration from a partnership firm in which assessee is a partner on the
ground that share of profit received from the firm is claimed as exempt u/s.
10(2A) of the Act — Held, No.
Per Sudhakar Reddy :
Facts :
The assessee while filing his return of income claimed a
deduction of Rs.3,90,268 against his business income being remuneration from a
partnership firm in which he was a partner. The assessee had claimed share of
income from partnership firm as being exempt u/s.10(2A). The Assessing Officer
(AO) apportioned the expenditure claimed and disallowed a sum of Rs.1,16,752 by
invoking provisions of S. 14A of the Act. The CIT(A) upheld the action of the
AO. On an appeal by the assessee to the Tribunal.
Held :
The Tribunal found that similar issue was considered and
decided in favor of the assessee by Mumbai Bench of the Tribunal in the case of
Sudhir Kapadia (ITA No. 7888/Mum./2003 and Bharat S. Raut (ITA No.
9212/Mum./2004). Following these two precedents the tribunal deleted the
disallowance.
Cases referred to :
1. Sudhir Kapadia v. ITO — Mum. ‘C’ Bench, ITA No.
7888/M/03 dated 26-2-2003
2. Bharat S. Raut — Mum ‘E’ Bench, ITA No.
9212/Mum./2004 and CO No. 212/Mum./2005
Note :
In the case of Sudhir Kapadia (ITA No. 7888/Mum./2003) the
Tribunal after considering various decisions concluded that it is not possible
to hold the view that share income in the hands of a partner of a partnership
firm is altogether tax free. It held that share of profit in the hands of a
partner is income which has suffered tax in the hands of the firm and found that
the share of profit from the firm is exempt from tax u/s.10(2A) not in absolute
sense but with a view to avoid double taxation. Accordingly, it concluded that
S. 14A is not applicable to the facts of the case.
