|COURT:||Delhi High Court|
|CORAM:||Sanjiv Khanna J, V. Kameswar Rao J|
|CATCH WORDS:||loan or deposit of money, Partnership|
|DATE:||February 3, 2015 (Date of pronouncement)|
|DATE:||February 9, 2015 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 269SS: Transaction of loan between a firm and its partner does not attract s. 269SS. If other High Courts have taken a consistent view, that should be followed even if opposite view is possible|
(i) The question raised is whether in a transaction between the firm and the partner the provision of Section 269SS would be attracted and if we hold that Section 269SS was attracted and therefore violated, whether the assessee would be entitled to benefit of Section 273B of the Act. The position that emerges is that there are three different High Courts in (2013) 354 ITR 9 (Mad), Commissioner of Income Tax Vs. V.Sivakumar, (2008) 304 ITR 172 (Raj), Commissioner of Income Tax Vs. Lokhpat Film Exchange (Cinema) and (2005) 277 ITR 420 (P&H), Commissioner of Income Tax Vs. Saini Medical Store which have held that Section 269SS would not be violative when money is exchanged inter-se between the partners and partnership firm in spite of the fact that the partnership firm and individual partners are separate assessees. We appreciate and understand that the opposite view is possible. Keeping in view that three different High Courts have taken a consistent view on the facts, which are similar to the facts in the present case, which includes the judgment of the Madras High Court as late as in the year 2013, we respectfully follow the same line of reasoning given by the Madras High Court in the case of V. Sivakumar (2013) 354 ITR 9;
(ii) Having said that, it is clear that any interest, salary, bonus, commission or remuneration paid by a firm to any of its partners should be regarded as a mode of adjusting the amount that must have been taken to have been contributed to the partnership assets by a partner, who can really contribute in kind as well as in money. Applying this principle, we are of the view that the transaction effected in these cases cannot partake the colour of loan or deposit and as such, Section 269-SS nor Section 271-D of the Act would come into play.
(iii) It is an undisputed fact that the money was brought by the partners of the assessee-firms. The source of money has also not been doubted by the revenue. The transaction was bona fide and not aimed to avoid any tax liability. Creditworthiness of the partners and genuineness of the transactions coupled with the relationship between the “two persons” and two different legal interpretations put forward could constitute a reasonable cause in a given case for not invoking Section 271-D and 271-E of the Act. Section 273B of the Act would come to the aid and help of the assessee.