9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (5) TMI 1684 - HC - Income TaxHigher claim of deduction u/s 80IB - not providing interest and remuneration to the partners - Whether Section 80IB (10) enables AO to re-compute the profit of undertaking claiming deduction u/s 80IB i.e. the partnership firm as in the present case and not the case of partner s admissibility towards interest/ remuneration as held in the case of Smt. Mala Tandon 2011 (6) TMI 855 - ITAT AMRITSAR ? - HELD THAT - On interpretation of the partnership agreement and considering the wish of the partners reflected in the partnership deed not to pay /charge interest on the partners capital and the remuneration the learned tribunal has rightly deleted the disallowance made by AO with respect to the deduction claimed u/s 80IB. As rightly observed by tribunal mere incorporation of interest on the partners capital and remuneration does not signify that the same are mandatory in nature. We concur with the view taken by the learned tribunal. We see no reason to interfere with the impugned judgment and order passed by the learned tribunal. - decided against revenue.
Issues:
1. Disallowance of deduction under Section 80IB of the Income Tax Act due to lack of provision for interest and remuneration to partners in a partnership firm. 2. Justification of the Income Tax Appellate Tribunal's decision in allowing the deduction claimed under Section 80IB of the Income Tax Act. Analysis: Issue 1: The primary issue in this case revolves around the disallowance of the deduction claimed under Section 80IB of the Income Tax Act by the Assessing Officer due to the absence of provisions for interest and remuneration to partners in the partnership agreement. The Assessing Officer contended that the lack of provision for interest and remuneration led to a higher profit claim under Section 80IB, depriving the revenue of the due tax amount. The learned CIT(A) upheld this disallowance. However, the Income Tax Appellate Tribunal (ITAT) partly allowed the appeal by the assessee and deleted the disallowance. The ITAT based its decision on the interpretation of the partnership agreement, where partners had expressed their intention not to pay or charge interest on capital and remuneration. The High Court concurred with the ITAT's reasoning, emphasizing that the absence of provisions for interest and remuneration did not automatically render the deduction invalid. Therefore, the High Court dismissed the appeal by the revenue, stating that no substantial questions of law arose in this matter. Issue 2: The second issue questions the justification of the ITAT's decision in allowing the deduction claimed under Section 80IB of the Income Tax Act. The revenue contended that the ITAT failed to appreciate the impact of not providing interest and remuneration to partners, resulting in a higher profit claim and reduced tax revenue. The revenue also argued that Section 80IB(10) empowers the Assessing Officer to re-compute the profits of the undertaking claiming the deduction, not the partner's admissibility towards interest or remuneration. However, the High Court upheld the ITAT's decision, stating that the partnership agreement's terms regarding interest and remuneration were crucial in this context. The High Court agreed with the ITAT's interpretation, emphasizing that the absence of provisions for interest and remuneration did not automatically disqualify the deduction under Section 80IB. Consequently, the High Court dismissed the revenue's appeal, concluding that the ITAT's decision was justified in this case.
|
