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M/s. Almac Corporation 10, Ahmedabad Versus DCIT, Circle-10, Ahmedabad

2015 (9) TMI 656 - ITAT AHMEDABAD

Disallowance treating remuneration paid to the partners under the provisions of section 40(b)(v) as excessive - whether the interest income is to be considered for the purpose of calculation of remuneration to the partners? - Held that:- On perusing the assessment order, we find that though the A.O has stated that the interest of ₹ 8,30,979/- is in the nature of non business income and taxable under the head “income from other sources” but no such adjustment has been made by him while comp .....

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not been accepted by the Revenue. See case of Md. Serajuddin & Brothers [2012 (8) TMI 104 - CALCUTTA HIGH COURT]

A.O was not justified in working out the claim of remuneration after excluding the interest income. We thus direct the A.O to include the interest income while calculating the remuneration payable to partner u/s. 40(b)(v) of the Act - Decided in favour of assessee. - I.T. A. No. 2115/AHD/2011 - Dated:- 10-4-2015 - SHRI SHAILENDRA Kr. YADAV AND SHRI ANIL CHATURVEDI, JJ. For .....

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me of ₹ 28,48,230/-. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 28.04.2010 and the total income was determined at ₹ 31,82,150/-. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who vide order dated 04.07.2011 dismissed the appeal of the Assessee. Aggrieved by the aforesaid order of ld. CIT(A), Assessee is now in appeal before us and has raised the following effective ground;- 1. Ld. C .....

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During the course of assessment proceedings, A.O noticed that Assessee had earned interest income of ₹ 9,83,256/- which included interest of ₹ 1,52,277/- earned from Neo Plast Engg. Pvt. Ltd. He was of the view that the remaining interest of ₹ 8,30,979/- was in the nature of non business income and taxable under the head income from other sources and was to be excluded for the purpose of calculation of remuneration payable to partners. He therefore, after excluding the aforesa .....

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nd dismissed the appeal of the Assessee by holding as under:- 2.2 I have carefully considered the submission of the Ld. Counsel as well as the finding of the Assessing Officer recorded in the assessment order. I have also considered the decisions relied upon by the Ld. Counsel. It can be seen from the assessment order that the assessee has claimed the remuneration to partners from the net profit shown in the profit and loss account whereas the remuneration to partners is allowable to the working .....

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or payable to all the partmers of the firm if such amount has been deducted while computing the net profit." only from the business income of the firm. 2.3 It is evident from the definition of book profit as given in the aforesaid Explanation-3 that the profit and loss account for the purposes of book profit will be computed in the manner laid down in Chapter IV-D of the Act. As per Chapter IV-D of the Act, the income and expenditure as mentioned in sec. 28 to 44DB will only be considered .....

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s income as taxable under the head income from other sources. The assessee was enjoying the interest income of ₹ 9,83,256/- out of which ₹ 8,30,979/- the as interest from deposits and interest on FDs cannot be considered as part of business income. The Ld. Counsel could not establish as to how the interest from deposits and interest on FDs is the business income. It is an admitted fact that the appellant firm is not engaged in the business of moneylending business. Therefore, the int .....

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essee would not be assessable as business income but assessable as income under other sources. The Hon'ble Kerala High Court in the case of CIT vs. Venad Conductors (P) Ltd. 326 ITR 513 (Ker.) had held that income from short term deposit cannot be treated as income from business but it is income from other sources. Likewise, in the case of T.O. Abraham & Company vs. Dy.CIT 325 ITR 201 (Ker,) It was held that interest income from bank deposits is assessable under the head "income fro .....

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and CIT vs. Monark Tools (P) Ltd. 260 ITR 258 (Mad.). The Hon'ble Delhi High Court in their later on decisions had also taken the view that, interest income is assessable as income from other sources. In the case of CIT v. Shri Ram Honda Power Equip. (Delhi) 289 ITR 475 (Delhi), the Hon'ble Delhi High Court had held that where surplus funds are parked with the bank and interest is earned there on it can only be categorized as income from other sources. The other category is where the ex .....

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ot;income from other sources" and therefore, no remuneration to partners will be allowable on this interest income. The Ld. Counsel has neither furnished the copy of the partnership deed nor established as to how the decisions relied upon by him are applicable in the facts of appellant's case. The-Hon'ble Amritsar Tribunal had held in the case of Shree Balaji Alloys vs. ITO [2010] 127 TTJ 129 (ASR) that a decision of the court is applicable to the case unless it is clearly demonstra .....

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of ₹ 3,28,920/- (Rs. 19,83,200/- ₹ 16,54,280/-) and his action to this extent is confirmed. The addition so made is sustained. All the grounds of appeal are accordingly dismissed. 5. Aggrieved by the aforesaid order of ld. CIT(A), Assessee is now in appeal before us. 6. Before us, ld. A.R. reiterated the submissions made before lower authorities and further submitted that interest income has to be considered for the purpose of working out remuneration to the partners because it is pa .....

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mp; 2009-10 but the addition made by A.O were deleted by ld. CIT(A) and the order of ld. CIT(A) has not been challenged by the Revenue. She placed on record at page 6 to 17 the copy of the order of CIT(A) for A.Y. 07-08 & A.Y. 09-10. She further placed reliance on the decision of Ahmedabad Tribunal in the case of DCIT vs. Ajay Engineers (ITA No. 2772/A/2012 order dated 07.06.2013). She therefore submitted that when facts of the case in the year under appeal are identical to that of earlier y .....

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n of remuneration to the partners. On perusing the assessment order, we find that though the A.O has stated that the interest of ₹ 8,30,979/- is in the nature of non business income and taxable under the head income from other sources but no such adjustment has been made by him while computing the income from business meaning thereby that he has accepted interest income as business income. We further find that interest receipts in A.Y. 07-08 & 09-10 were considered as non business inco .....

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