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2020 (12) TMI 800 - AT - Income TaxRectification of mistake u/s 254 - disallowance of interest to partner not adjudicated - revision in the estimation of the net profit of the assessee’s contract business from 5% (of the gross receipt) to 8%, as there was no direction by the revisional authority for the same - as contended by assessee tribunal, while concluding its’ order had omitted to consider the disallowance of interest to partners, claimed in the sum which had therefore remained to be adjudicated, so that the same be rectified accordingly - HELD THAT:- We are, with respect, afraid to say that neither the assessee nor the Revenue has properly understood the Tribunal’s order. The claim of interest to partners (on their capital), at ₹ 2,49,557, forms part of the sum of ₹ 5,69,330 directed to the examined afresh by the ld. CIT, and indeed disallowed per the impugned assessment u/s. 143(3) r/w s. 263. No adjustment to the returned income on account of interest and remuneration to partners, it held, is called for. As order accordingly clarifies that the business income will remain the same, i.e., as originally assessed (at ₹ 14,47,620), which is after deduction of both interest and remuneration to partners, so that the only adjustment that obtains, post its’ order, is for ₹ 1,77,273, assessable u/s. 56. The reference to salary to partners is in view of section 40(b)(v), which limits the extent thereof with reference to book profit. In this context, it stands clarified that inasmuch as the enhanced estimation of business income (by applying the rate of 5 percent of the gross receipt, as against the returned 2.4%), would not impact the book profit (as defined in Explanation (v) to section 40(b)(v)), the remuneration to the partners allowable with reference to the assessee’s book profit is not breached on the claimed sum of ₹ 1,30,000. No rectification, even as clarified during hearing is called for; the order passed, as would be apparent, being with a view to set at rest the controversy arising on account of the misreading of Tribunals’ order, even as assured during hearing.
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