2010 (9) TMI 986 - AT - Income Tax

Summary

Issues involved: Appeal against the order of CIT(A) regarding inclusion of interest income in books profit for calculating remuneration u/s 40(b) and relevance of certain decisions in the context of Section 40(b).

Issue 1: Inclusion of interest income in books profit for calculating remuneration u/s 40(b)
The appellant contended that the interest income of Rs.1,56,65,189/- should be considered as part of books profit for determining remuneration to working partners u/s 40(b). The appellant cited the Rajkot ITAT Decision in ACIT Vs. Sheth Brothers, emphasizing that interest income is includable in books profit for calculating remuneration u/s 40(b). The appellant argued that the interest income should not be excluded from the net profit for determining the allowable deduction of remuneration to partners under s. 40(b).

Issue 2: Relevance of certain decisions in the context of Section 40(b)
During the proceedings, the appellant's counsel highlighted that the AO had excluded the interest income from the net profits for calculating remuneration u/s 40(b). The appellant relied on decisions from various ITAT Benches, such as the Rajkot Bench and Jaipur Bench, to support their argument that interest income should not be excluded from the net profit for determining the allowable deduction of remuneration to partners under s. 40(b). The Tribunal agreed with the appellant's contentions and held that the interest income should not be excluded from the net profit for calculating remuneration u/s 40(b).

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the interest income of Rs.1,56,65,189/- should be considered in the books profit for determining remuneration to working partners u/s 40(b. The decision was pronounced in the open court on 1st September, 2010.