Dispute on Disallowance of Partner’s Remuneration: Ishan International vs ACIT Circle-28(1), New Delhi, AY 2015-16

Detailed Analysis of ITAT Decision: Ishan International vs ACIT Circle-28(1), New Delhi for AY 2015-16

The case ITA No.6746/DEL/2019 addresses the appeal by Ishan International against the disallowance of remuneration paid to its working partners as per Section 40(b)(v) of the Income Tax Act, 1961, for the assessment year 2015-16. The dispute centers on whether the remuneration to the partners was duly authorized by the partnership deed, a crucial aspect for the allowance of such deductions.

The case was heard by the Delhi Bench ‘B’ of the Income Tax Appellate Tribunal, presided over by Shri Pradip Kumar Kedia, Accountant Member, and Shri Yogesh Kumar US, Judicial Member. The appeal challenged the order dated July 11, 2019, by the CIT(A), which had confirmed the Assessing Officer’s disallowance made in the assessment order dated December 8, 2017.

The main contention from the appellant was that the remuneration disallowed by the AO was actually covered under a supplementary deed, which was not considered during the initial assessments. The tribunal noted that this supplementary deed explicitly authorized the payment of remuneration to the partners, which was a critical document overlooked by both the AO and the CIT(A).

During the tribunal proceedings, it was emphasized that due to the serious health issues of one partner and the death of another, an expedited resolution was imperative. The tribunal decided to accept the supplementary deed as evidence without remanding the case back to the AO, citing the extraordinary circumstances and the need to prevent further litigation.

The decision highlighted the tribunal’s approach to handling cases where the facts are clear but procedural lapses in lower assessments have occurred. It set aside the CIT(A)’s order and directed the AO to reverse the disallowance, acknowledging the remuneration as a legitimate business expense as per the partnership agreement.

This case underscores the importance of providing all pertinent documents during the assessment proceedings and the tribunal’s role in ensuring justice by considering overlooked evidence. The order was pronounced on July 3, 2023, providing relief to the appellant and setting a precedent on handling similar disputes regarding partnership remunerations.

Dispute on Disallowance of Partner’s Remuneration: Ishan International vs ACIT Circle-28(1), New Delhi, AY 2015-16