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2015 (5) TMI 1225 - AT - Income TaxEstimation of Net profit - provisions of Section 44AD applicability - interest on capital paid to partners and the remuneration paid to working partners from the income estimated @8% of turnover - assessee has submitted that the assessment was framed u/s.144 of the Act and the books of accounts were rejected by the AO and estimated the net profit @8% of the gross turnover - HELD THAT:- In the instant case, the turnover of the assessee is more than ₹ 1 crore, therefore, provisions of Section 44AD cannot be strictly applied but inference can be drawn from this provision. Even the proviso to Section 44AD says that where the eligible assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of Section 40 of the Act. In the instant case, the Assessing Officer has estimated the income @8% of the total turnover of the assessee but he has not allowed the salary and interest paid to the partners, though the AO was required to allow the same even as per the provisions of Section 44AD of the Act. In the light of the these facts, we find force in the contention of the ld. AR of the assessee, therefore, we direct the AO to allow deduction on salary paid to working partners and interest paid to them on their capital from the estimated income subject to the conditions and limits specified in clause (b) of Section 40 of the Act. Accordingly, we modify the order of the CIT(A) and direct the AO to allow deduction of interest and salary paid to the partners subject to conditions and limits specified in clause (b) of Section 40 of the Act. Appeals of the assessee are allowed for statistical purposes.
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