Allowed

M/s Prashanth Enterprises, v. The Income Tax Officer

Telangana HC9 Dec 2014ITTA/55/2004

Case brief

AI extract

What is this about?

In an appeal regarding the assessment year 1994-95, thecourt dismissed the prohibitions of the Tribunal, holding that the firm existed operationally before the formal deed. Consequently, the appellant was allowed to claim the full deduction for partner salaries.

What did the court decide?

The appeal was allowed, the Tribunal order was set aside, and the appellant is entitled to the full deduction of partner salaries.

M/s Prashanth Enterprises, Vs The Income Tax Officer — Income Tax | Telangana HC (2014)

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THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY

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AND

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THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM

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I.T.T.A.No.55 of 2004

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JUDGMENT: (Per the Hon’ble Sri Justice L.Narasimha Reddy)

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This appeal is preferred by the assessee against the order, dated 12.02.2002, passed by the Hyderabad Bench ‘A’ of the Income Tax Appellate Tribunal in I.T.A.No.1487/Hyd/1997.

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The dispute is as to whether the Assessing Officer is justified in permitting only 1/3^rd of the salary to a partner, in a prima facie adjustment made under Section 143(1)(a) of the Income Tax Act, in respect of the returns submitted by the appellant for the assessment year 1994-95.

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Heard Smt. K.Neeraja, learned counsel for the appellant, and Sri S.R.Ashok, learned Standing Counsel for the respondent.

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The appellant is a firm that came into existence in the year 1993, to carry out the business of distribution of Gas in Karimnagar. In the returns filed by the appellant for the assessment year 1994-95, one of the items claimed as deduction was salary paid to the partners. The Assessing Officer permitted deduction of only to the extent of 1/3^rd on the basis that the actual partnership deed came into existence only on 01.04.1993. The same view was upheld by the Commissioner as well as the Tribunal.

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This very question fell for consideration before this Court in I.T.A.No.23 of 2003 filed by the appellant herein. That, however,

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was in relation to the deduction of interest paid to the partners. In respect of the same assessment year in the order, dated 26.08.2014, we took the view that notwithstanding the fact that a formal deed of partnership was executed on 01.04.1993, the firm existed much prior to that and with reference to the assessment year 1994-95, it was very much operational.

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Therefore, we allow the appeal and set aside the order of the Tribunal. Further, we hold that the appellant is entitled to claim deduction of the entire salary paid to the partners for the assessment year 1994-95. There shall be no order as to costs.

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The miscellaneous petitions filed in this appeal shall also stand disposed of.

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____________________ L.NARASIMHA REDDY, J.

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_____________________ CHALLA KODANDA RAM, J.

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Date:09.12.2014 GJ

M/s Prashanth Enterprises, v. The Income Tax Officer

Case brief

What is this about?

What did the court decide?

M/s Prashanth Enterprises, v. The Income Tax Officer

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Cases cited

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