No penalty y/s 269SS if Partners introduced capital in cash

ITO v. Dayamayee Marble & Granite

Decision:    In assessee’s favour.

Penalty under section 271D–Contravention of provisions of section 269SS–Capital contribution by partner in cash

Facts:

Assessee was a partnership firm. Assessee received Rs. 12 lakhs on various dates from partner ‘A’ towards capital contribution in cash. AO treated same as loan or deposit in cash and levied penalty under section 271E for violation of section 269SS. CIT(A) deleted it.

Held:

It was found that the capital contributed by the partner in the partnership firm did not tantamount to loan or deposit within the meaning of section 269SS and accordingly Tribunal did not find any infirmity in the order of the CIT(A) cancelling the penalty levied thereon. Order of CIT(A) was not to be interfered with. Appeal of revenue was dismissed.

Even same logic could be extended to section 269ST IS another question? Above judgement was in the context of Loans/Deposits vs Capital and don’t have any other relevance.

Resultantly, ratio laid down in above judgement would not be relevant in the context of section 269ST which operates on a different footing. Section 269ST appears to be more wider in scope and interpretation when it comes to capital contribution by partners in the firm.

Author will becovering the applicability of section 269ST on partner capital contribution incash in the firm.

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