2021 (11) TMI 324 - ITAT SURAT - Income Tax

Head Note / Extract:
Deduction 10AA(9) - Interest and remuneration to partners - Claim allowable on net income or gross income - AO while passing the assessment order restricted the deduction under section 10AA by making allowance of remuneration to partners and interest @ 12% on their capital contribution - CIT(A) deleting the disallowance by invoking provisions of Section 80(IA)(10) r.w.s. 10AA(9) in giving deductions of interest on Capital and Remuneration to partners of the assessee firm after finding that the assessee had taken undue benefits of Section 10AA by not claiming interest on Capital and Remuneration to partners which resulted increase in exempted profit of the assessee - HELD THAT:- CIT(A) while granting relief to the assessee followed the decision of Alidhra Taxspin Engineers [2017 (5) TMI 1684 - GUJARAT HIGH COURT] wherein it was held that mere incorporation of interest on partner’s account and remuneration does not signify that same are mandatory in nature CIT(A) also considered the CBDT’s Circular No.739 of 1996 dated 25.03.1996 wherein it has been clarified that no deduction under section 40(b)(v) of the Act is admissible under partnership deed either specified the amount of remuneration payable to each individual working partners or laid down the manner quantify of such remuneration. In the present case, the clauses of partnership deed specifically restrict not to charge payment of interest to partners on their capital contribution as well as remuneration. We find that ld. CIT(A) has decided the issue after proper appreciation of fact and following the decision of Alidhra Taxspin Engineers (supra). Appeal raised by the revenue are dismissed.