TMI Blog2015 (12) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... The interest income, therefore, cannot notionally be excluded for the purpose of determining the allowable deduction of remuneration paid to the partners under Section 40b of the Act. As in the present case, in this case also interest was assessed as business income, and yet, for the purpose of computing admissible deduction under section 40(b), a different path was followed - Decided in favour of assessee. - ITA No. 2583/Ahd/2011 - - - Dated:- 15-9-2015 - Pramod Kumar, AM And Rajpal Yadav, JM For the Appellant : M. S. Chhajed For the Respondent : J. P. Jangid ORDER Per Pramod Kumar, AM 1. By way of this appeal, the assessee appellant has challenged correctness of the order dated 2nd August, 2011 passed by the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 partners from the book profit which is authorised by and is in accordance with the terms of the partnership deed. The book profit has been defined in Explanation-3 below sec. 40(b) of the Act which reds as under : Explanation-3 - For the purpose of this clause, book profit means the net profit, as shown in the profit and loss account for the relevant previous year, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court had held in the case of Murli Investment Co. Vs. CIT 167 ITR 368 (Raj.) that merely investing surplus funds instead of keeping them idle and obtaining interest thereon would not constitute business and therefore, the interest by the assessee would not be assessable as business income but assessable s 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 from other sources ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ources 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 Shre Balji Alloys sv. ITO (2010) 127 TTJ 129 (ASR) that a decision of the court is not applicable to the case unless it is clearly demonstrated that there is similarity of the facts. Thus, the Ld. Counsel cannot derive support from the decisions so relied upon. 2.5 Considering the above discussion, I am of the opinion that the Assessing Officer has correctly disallowed the claim of the remuneration to part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts which are not deductible. Relevant portion of Section 40 reads as under : Notwithstanding anything to the contrary in [sections 30 to 38], the following amounts shall not be deducted in computing the income chargeable under the head Profits and gains of business or profession ,- (a) in the case of any assessee- (b) in the case of any firm assessable as such,- (i) any payment of salary, bonus, commission or remuneration, by whatever name called (hereinafter referred to as remuneration ) to any partner who is not a working partner; or (ii) any payment of remuneration to any partner who is a working partner, or of interest to any partner, which, in either case, is not authorized by, or is not in accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) On the balance of the book-profit At the rate of 60 per cent. 5. From the above provision it can be seen that where an assessee is a partnership firm, any payment of salary, bonus, commission or remuneration to its partners under certain circumstances, if it exceeds the limits set out in Clause B, deduction to the extent of excess cannot be claimed. In the present case, such ceiling is prescribed in two slabs. On the first ₹ 30 lacs on the book profit or in case of loss such ceiling is ₹ 1,50,000/- or 90% of the book profit whichever is more. On the balance of the book profit such ceiling prescribed is @ 60%. 6. The question, therefore, arises whether the interest income earned by the assessee-firm from the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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