No reassessment to disallow pension paid to retiring partner in accordance with partnership deed

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No reassessment to disallow pension paid to retiring partner in accordance with partnership deed

Deloitte Haskins & Sells Chartered Accounts
[2019] 102 taxmann.com 443 (SC)
IT : SLP against High ruling was to be dismissed on grounds of tax effect being less than Rs. 1 crore where assessee, a partnership firm made payment of certain sum as pension to retiring partners as per partnership deed and same was allowed in original assessment, and all necessary facts were already on record, duly disclosing that there was no failure on part of assessee to disclose primary facts, reassessment to disallow said payment was unjustified
Section 37(1), read with sections 147 and 184, of the Income-tax Act, 1961 – Business expenditure – Allowability of (Firm and partner)
 – Assessee was a partnership firm of Chartered Accountants
– After period of four years from scrutiny assessment, Assessing Officer noticed that a certain sum deducted from gross professional receipts of assessee-firm being a sum paid to retired partner
 – According to Assessing Officer, this was not an allowable deduction since a partner was not an employee of firm and was, therefore, not entitled to pension after retirement; payment to retiring partner, therefore, was capital in nature and, thus, initiated reassessment
– All these details were on record before Assessing Officer, when original assessment proceedings were being made and there was nothing outside of record which could have thrown any light on nature of payment and its deductibility – High Court by impugned order held that since all necessary facts were already on record, duly disclosing that there was no failure on part of assessee, reassessment was unjustified – Whether Special Leave Petition filed against impugned order was to be dismissed as tax effect was less than Rs. 1 crore – Held, yes

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