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2015 (3) TMI 1135 - AT - Income TaxDisallowance u/s 14A - interest payment to the partners on their capital balance - Held that:- It is pertinent to note that the profit of the partnership firm is distributed among the partners in the ratio of their profit sharing. The interest payment to the partners on their capital balance is not revenue neutral as the same is taxable in the hands of the partners. In a case where no interest is provided on the capital account of partners, the corresponding profit/income of the partnership firm is assessed to tax and the share of the partner is exempt in their hands. Therefore when there is a direct relation between the share in the profit of the firm and the interest on capital account then the said interest cannot be treated as an expenditure to be attributable for earning the dividend income. Accordingly, in the facts and circumstances of the case, we delete the addition to the extent of disallowance u/s 14A on account of interest expenditure which is not on the borrowed fund but on the capital contributed by the partners - Decided partly in favour of assessee Disallowance on account of foreign commission payment u/s 40(a)(i) for want of TDS - Held that:- The income from the offshore supplies is not taxable in the hands of the assessee under the regular provisions of Income tax Act, 1961. In such a situation there is no need to examine the provisions of DTAA for ascertaining whether there is a permanent establishment of the assess in India or not - Decided in favour of assessee
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