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2013 (9) TMI 605 - AT - Income TaxExemption u/s 10B - inflated profits - Interest on Capital and Remuneration not debited to profit and loss account – Held that:- payment of interest on capital and remuneration to partners is not hit by section 40(b) of the Income-tax Act. The mere fact that the partners have chosen to forego interest on capital and remuneration payable to them does not ipso-facto mean that they are not admissible for deduction. The fact that the assessee has not debited such interest and remuneration payable to partners to its profit & loss account in spite of their admissibility to deduction makes its intention quite evident, namely, to inflate the profits eligible for exemption u/s 10B. The Assessing Officer has correctly worked out interest on capital and remuneration payable to partners and excluded them from the overall profits of business for working out the profits eligible for exemption u/s 10B of the Income-tax Act. - Decided in favor of revenue.
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