The Income Tax Appellate Tribunal (ITAT), Pune bench has quashed an addition relating to partner’s share of profit on the basis of the partnership deed.
Earlier, the Assessing Officer has made an addition against the assessee, Mr. Ajay Verma holding that since the assessee has not proved the claim along with the income tax return/balance sheet/P&L account. On first appeal, the CIT(A) has upheld an addition on account of share of profit from a partnership firm in which the assessee is a partner.
Noting that the decision of the CIT(A) is against the law, Shri T.S. Kapoor (Accountant Member) has held that Section 10(2A) of the Act specifically exempts the share of income from a partnership firm.
“In this respect, the ld. AR read from the order of the ld. CIT(A). The ld. AR invited my attention to the copy of the partnership deed of the firm M/s. Sidha Construction placed at P.B. pgs. 17 to 24 and copy of detailed ITR of such firm placed at P.B. pgs. 25 to 53. The ld. AR submitted that these evidences were filed before the ld. CIT(A) and therefore ld. CIT(A) should have allowed the appeal of the assessee.”
The assessee contended that the firm had paid tax as per the law on the profit and distributed the remaining profits to partners as per the provisions of the partnership deed and also it was submitted that share of profit received from the firm is exempt u/s. 10(2A) of the Act.
The Tribunal relied on the ITR of the firm and the copy of partnership deed wherein the remuneration was mentioned in the partnership deed.
Quashing the impugned orders, the Tribunal observed that “However, the ld. CIT(A) accepted the claim of the assessee regarding partner’s salary of Rs.3,60,000/- but upheld the addition on account of share of profit from the above firm by holding that assessee had not disclosed such share in his income tax return. I find that the share of profit from a partnership firm is specifically exempt under the provisions of Section 10(2A) of the Act and the undisputed fact is that such share was received from the partnership firm in which the assessee was a partner. The assessee vide written submissions, placed at P.B. pgs. 7 and 8, had filed with the ld. CIT(A), copy of partnership deed as well as detailed copy of the ITR of the firm, wherein the assessee was a partner and from where he had received the share of profit. Therefore, in view of above facts and circumstances of the case, I allow the appeal of the assessee.”
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