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2015 (3) TMI 1318 - AT - Income TaxRate of estimation of income in the hands of the firm - estimation of income at 8% - allowance of deduction towards interest and remuneration paid to partners u/s.40(b) - Held that:- As seen from assessee's P&L A/c assessee's sales stood at ₹ 2.71 Crores, whereas its closing stock was at ₹ 2.88 Crores. Construction cost during the year is about ₹ 3.81 Crores. This indicate that the project has not yet been completed or partly completed. However, as seen from the P&L A/c placed on record which was basis for the Assessing Officer to make disallowances, assessee has earned gross profit at 15% and Net Profit 5.4%. Assessee has major liability in the form of interest on term loans for reduction in profit from 15% gross to 5% net. Keeping these factors and also the fact that assessee paid ₹ 14,51,871/- as interest on the term loans, apart from other expenditure to indicate that estimation by the CIT(A) at 8% on the gross receipts is reasonable. Revenue has not brought on record anything to counter how this estimation is less on the given set of facts. In view of this, we uphold the estimation at 8%. Statutory allowance of deduction u/s.40(b)- Allowance of interest on partners' capitals and partners' remunerations - Held that:- All firms are uniformly assessable as firms only and there is no difference in tax rates. The profit derived from the partnership firm is exempt in the assessment of the partners as the same is being taxed at normal rates in the assessment of the partnership firm itself. Only salary or interest paid to the partners is subject to tax in the assessment of the partners as the same is excluded from the assessment of the partnership firm. Provisions of Section 40(b) allows interest paid to partners and remuneration paid to the partners as an allowable deduction, subject to certain conditions mentioned in Section 40(b) of the Act. Therefore, there is a change in the provisions itself from a disallowance provisions to allowance provisions subject to restrictions. Thus, w.e.f. 1993-94, Section 40(b) is enabling a deduction towards interest and remuneration paid to the partners by way of statutory deduction. Therefore, jurisdictional High Court judgment given for AY.1981-82 in the context of the provisions then existing is no longer applicable to the revised assessment procedure. This same view was held by various co-ordinate Benches - Decided against revenue
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