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2016 (2) TMI 192 - ITAT AHMEDABAD

2016 (2) TMI 192 - ITAT AHMEDABAD - TMI - Allowance of partners remuneration u/s. 40b from the additional income offered for taxation during survey - CIT(A) deleted the addition - Held that:- CIT(A) while deleting the addition has noted that Assessee had only one source of income being construction activity and in the statement recorded during the course of survey, it was categorical mentioned that the income was from construction project, it was disclosed in the Profit and Loss account of the f .....

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no bar in the Act for claiming partners remuneration from such additional business income. Before us, Revenue has not controverted the findings of ld. CIT(A) nor has brought on record any contrary binding decision. We further find that Hon’ble Calcutta High Court in the case of Md. Serajuddin & Brothers vs. CIT reported in (2012 (8) TMI 104 - CALCUTTA HIGH COURT ) has held that even if the income from other sources is included in the Profit and Loss accounts, to ascertain the net profits qua boo .....

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r A.Y. 2003-04. 2. The relevant facts as culled out from the material on record are as under. 3. Assessee is a partnership firm stated to be in the business of building construction. Assessee filed its original return of income for A.Y. 2003-04 on 30.11.2003 declaring total income of ₹ 22,12,489/-.Thereafter the case was re-opened and notice u/s. 148 of the Act was issued on 25.02.2010 and thereafter assessment was framed u/s. 143(3) r.w.s. 147 vide order dated 29.10.2010 and the total inc .....

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7; 13,94,516/- made by the Assessing Officer. 4. Assessee had also filed C.O and the grounds raised in its C.O. reads as under:- 1. The ld. CIT(A) has erred in law and on the facts of the case in confirming the action of ld. A.O in reopening the assessment year under consideration which is bad in law and without jurisdiction on following amongst other grounds: (i) It is based on audit objection; (ii) There is no proof of valid service of notice u/s. 148 of the Act on record; (iii) There is no fa .....

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he return of income, Assessee had claimed partners remuneration in the form of salary of ₹ 15,52,074/-. A.O was of the view that as per provisions of Section 40(b)(v)(2) of the Act, the remuneration which is to be paid is on the book profits of the business of the previous year and the book profit means the net profit as shown in the Profit and Loss account for the relevant previous year computed in the manner laid down in Chapter IV-D. He was of the view that the undisclosed income which .....

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. Ground No.3 is against the A.O. re-computing the deduction u/s. 40(b). There was a survey in the case of the assessee when a voluntary disclosure of ₹ 35,00,000/- was made. This income was stated to be the undisclosed income from the project during the year. It was shown in the P&L account prepared for the year. It was argued that the income so offered was from the construction business of the firm, which was the only business of the assessee and that it has been noted in the origina .....

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He mentions that the assessee could have furnished the information regarding parties from whom such unaccounted out of book income had been collected which would establish the source. The A.O. also did not accept the argument of the assessee that remuneration had been shown by the partners as their taxable income as according to him the matter pertained to the assessment of the firm and allowability u/s. 40(b). 3.1 During the course of appeal proceeding, the appellant submitted the statement rec .....

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sions including the Jurisdictional ITAT in the case of Virat Gems in ITA No.3541 and 3756/Ahd/2008 dated 19.11.2010. 3.2 I have gone through the facts of the case. The A.O. did not consider the income disclosed during survey for computation of deduction in respect of partner's remuneration u/s. 40(b) as according to him the source of this income was not established to be business. This conclusion of the A.O., I am afraid, cannot be upheld. The assessee had only one source of income, i.e. con .....

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for the appellant. Therefore having accepted the quantum of income disclosed it was not open to the A.O. to reject the claim of business income. In any case, this income has been shown by the partners as their taxable income and hence there should not be any grievance to the Department. The disallowance made is therefore deleted. This ground is allowed. 6. Aggrieved by the aforesaid order of ld. CIT(A), Revenue is now in appeal before us. 7. Before us, ld. D.R. supported the order of A.O. On th .....

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ial on record. The issue in the present case is about the addition made in respect of partners remuneration u/s. 40b of the Act. It is an undisputed fact that during the course of survey, Assessee had disclosed ₹ 35 lacs as unaccounted income. We find that ld. CIT(A) while deleting the addition has noted that Assessee had only one source of income being construction activity and in the statement recorded during the course of survey, it was categorical mentioned that the income was from con .....

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