TMI Blog2012 (9) TMI 940X X X X Extracts X X X X X X X X Extracts X X X X ..... emuneration to partners by deducting interest income on FDR of ₹ 11,82,769/- and thereby disallowing ₹ 4,90,553/- as excess remuneration to partners. 3. The assessee is a firm engaged in the business of raw cotton ginning and sale of finished cotton and cotton seeds. Assessee filed its return of income on 27-10-2004 declaring total income at ₹ 20,35,741/-.The return was processed u/s. 143 (1) of the Act. The assessment u/s.143 (3) of the Act was finalized by the A.O. on 1-12-2009 determining total income at ₹ 41,84,612/-.Due to audit objection the case was reopened u/s. 147 interalia for the reason that the assessee had calculated the book profit for allowing remuneration to the partners of the firm without deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee carried the matter before the CIT (A). 5. CIT (A) after considering the submissions of the A.R. of the assessee, vide his order dated 5-3-2010 upheld the order of A.O. by holding as under:- 5.3. I have carefully considered the facts of the case, the submissions of the appellant and the assessment order. It has been indicated by the appellant that due to seasonal nature of cotton ginning business the idle funds are kept in the FDRs and that the source of FDRs is out of business receipts. The plea of the appellant is not acceptable as the proximate source of interest income is the FDR and not business income. The appellant is not in the business of borrowing or lending of money and it has been admitted that only the surplus funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Equipment Services vs. ACIT (2010) 128 TTJ (JP) 68.He submitted that in both the aforesaid cases it has been held that the entire net profit without excluding interest income has to be considered for allowing deduction of remuneration paid to partners u/s. 40(b). The Ld. A.R. thus urged that the addition made by A.O. be deleted. 8. The Ld. D.R. on the other hand supported the order of A.O. 9. We have heard the rival submissions and perused the material on record. It is an undisputed fact that assessee has earned interest of ₹ 22,23,006/- on F.D s and paid interest of ₹ 10,40,237/- on money borrowed. The net interest income of ₹ 11,82,769/- has been credited to P L account and included in the net profit and the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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