Karnataka High Court
Commissioner Of Income-Tax And Anr. vs S.K. Srigiri And Bros. on 20 November, 2007
Equivalent citations: [2008]298ITR13(KAR), [2008]298ITR13(KARN)
Author: K.L. Manjunath
Bench: K.L. Manjunath
JUDGMENT K.L. Manjunath, J.
1. The short question that arises for consideration in these three appeals are:
When the assessee has received income from other sources, the remuneration claimed by the partners can be allowed as per Section 40(b)(iii) of the Income-tax Act?
2. The assessee is a firm doing business in commercial agencies. Before completion of assessment, when a survey was conducted, it was noticed that certain entries were not reflected in the returns of income and, thereafter, the revised returns were filed by the assessee. The Assessing Officer accepting the revised returns and passed the orders of assessments. The Commissioner of Income-tax exercising powers under Section 263 of the Income-tax Act, 1961, issued a notice to the assessee. In response to the same, the assessee contended that the income declared in the revised returns was from business and not from other sources and that the revision proceedings initiated by the Commissioner has to be dismissed. The Commissioner rejecting the contention of the assessee held that the additional income shown in the revised returns was not an income from business but from other sources and directed the Assessing Officer to compute the remuneration of the partners including the income from other sources credited to the profit and loss account declared during the course of survey under Section 133A of the Income-tax Act. Being aggrieved by the orders of the Commissioner of Income-tax, the assessee filed the appeals before the Income-tax Appellate Tribunal. The Tribunal after considering the records and the statement given by the partners of the assessee's firm on facts has come to the conclusion that the assessee had received additional income from business only and not from other sources and set aside the orders passed by the Commissioner. These orders are questioned by the Revenue raising the above question of law.
3. We have heard learned Counsel for the parties. Learned Counsel for the respondent fairly concedes that he has no quarrel over the legal proposition put forth by the Revenue. According to him, on facts the Tribunal has come to the conclusion that the additional income declared in the revised returns was disclosed only from business and not from other sources. Therefore, he contended that when the assessee had received the additional income from business only, the question of reopening the issue by the Commissioner exercising his revisional powers does not arise for consideration.
4. We have perused the orders of the Tribunal. The Tribunal has carefully considered the questions put by the authority and the answer of the partners of the assessee's firm and based on the same, the Tribunal has come to the conclusion that the additional income received by the assessee in the instant case is from business and not from other sources. If the Tribunal has come to the conclusion that the additional income is from business, the remuneration paid to the partners has to be deducted while considering the profit and loss. In the circumstances, we are of the opinion that on facts the Revenue has no case on the merits. So far as the question of law is concerned, we have to answer the same in favour of the Revenue.
Hence, these appeals deserve to be dismissed by upholding the orders passed by the Income-tax Appellate Tribunal and they are dismissed.