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2005 (8) TMI 288 - AT - Income TaxCash credit - "book profits" defined in s. 40(b) - Disallowance of a sum being discount allowed to the customers through the credit notes - HELD THAT:- The cash credits were found recorded in the books of account. Thus, the nature of such cash credits attains the character of business income. The words 'book profit' defined in s. 40(b) mean net profit as shown in P&L a/c computed in the manner laid down in Chapter IV-D. The assessee included such unexplained cash credits in its P&L a/c. The book profit is to be computed in the manner laid down in Chapter IV-D. Thus, this cash credit forms part of book profit. The assessee is not carrying on any other business and has no other source of income. Thus, whatever income arising to the assessee is business income and hence, computation is in accordance with Chapter IV-D. Thus, it can be held that such cash credit forms part of book profit for the purpose of computation of remuneration. The AO is directed to include such cash credit in the book profit for the purpose of allowing remuneration to the partners which is authorized by and in accordance with the terms of partnership deed. In the result, the appeal is allowed.
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