IN INCOME TAX APPELLATE TRIBUNAL NEW DELHI BENCH : SMC-II, NEW DELHI BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER ITA No. 4830/DEL/2015 Assessment year : 2011-12 Light Metals, Vs. Assistant Commissioner of C/o. G.P. Agarwal & Co., Income Tax, Vijay Tower, Circle 39(1), 252A, Shahpur Jat, New Delhi. New Delhi 110 049. PAN: AAAFL 2199R APPELLANT RESPONDENT Appellant by : Shri A.K. Khanna, CA Respondent by : Shri S.K. Jain, Sr. DR Date of hearing : 15.09.2016 Date of Pronouncement : 21.09.2016 ORDER This appeal is preferred against order dated 8.5.2015 of CIT(Appeals)-20, New Delhi on solitary ground that CIT(A) has erred in confirming disallowance of total remuneration of Rs.5,40,000 paid to partners, whereas in partnership deed specific provisions were prescribed; though various grounds are raised by assessee in appeal. 2. During course of hearing, ld. Counsel for assessee has contended that in partnership deed, there was specific provision for ITA No.4830/DEL/2015 Page 2 of 4 payment of salary to partners, Shri B.R. Choudhary and Shri Sanjay Kumar Sharma at Rs.5,000 per month and thereafter salary of both partners will be increased by Rs.1,000 per month w.e.f. 1.4.1995. It was also clarified in partnership deed that partners may however defer to later date increase in remuneration as may be mutually decided. ld. Counsel for assessee further contended that since specific clause was provided in partnership deed, findings of lower authorities are incorrect that there was violation of provisions of section 40(b) of Act. 3. ld. DR, on other hand, has placed reliance on order of CIT(Appeals). 4. Having carefully examined orders of lower authorities in light of rival submissions and partnership deed, I find that in clause 6 of partnership deed, specific provision was made for payment of salary of Rs.5,000 per month to Shri B.R. Chaudhary and Shri Sajjan Kumar Sharma and as per clause 7, salaries to both partners will be increased by RS.1,000 per month w.e.f. 1.4.1995 and option was given to partners to defer increase in remuneration. For sake of reference, clauses 6 & 7 of partnership deed are extracted hereunder:- 6. parties of Ist and IInd part will be paid following salary for effectively looking after business of firm. ITA No.4830/DEL/2015 Page 3 of 4 Shri B.R. Chaudhary (Ist Party) Rs.5,000/- p.m. Shri Sajjan Kumar Sharma (IInd Party) Rs.5,000/- p.m. 7. salaries of both partners will be increased b Rs.1,000/- per month with effect from 1.4.95 each year. partners may however defer to later date increased in remuneration as may be mutually decided. 5. I have also examined submission of assessee that in some of years on account of low profit, salaries were not increased, but it does not mean that right to increase salary of partners was extinguished. But in impugned assessment year, where there is sufficient profit, salary was proportionately increased in accordance with terms of partnership deed. Since specific provision has been made for increase of salary per year, I find no infirmity in increase in salary made by assessee. Moreover, it is option of assessee to make increase in salary as per partnership deed in particular year or it may be deferred. But it does not mean that in subsequent year, assessee lost right to increase salary relating to years which have been expired. Accordingly, I find no unjustification in increase in salary claimed by assessee. Therefore, I do not find myself in agreement with order of CIT(Appeals) and accordingly I set aside his order and direct Assessing Officer to allow salary claimed by assessee. 6. last ground relates to disallowance of telephone, conveyance and vehicle expenses @ 10% on account of personal use. Since element of personal use is always there, I find no un justification in ITA No.4830/DEL/2015 Page 4 of 4 disallowance of 10% of total expenses of telephone, conveyance and vehicle expenses. Accordingly findings of CIT(Appeals) in this regard are confirmed. 7. In result, appeal of assessee is partly allowed. Pronounced in open court on this 21st day of September 2016. Sd/- (SUNIL KUMAR YADAV ) Judicial Member New Delhi, Dated, 21st September, 2016. /D S/ Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, New Delhi. Assistant Registrar, ITAT, New Delhi. Light Metals v. Assistant Commissioner of Income-tax, Circle-39(1), New Delhi