TMI Blog2011 (11) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... O. by disallowing deduction claimed under section 80IC to this extent even though the disallowance was mandated by the provisions of section 80IA(10). 2. The CIT (A) has erred in not appreciating that the expression business transacted appearing in section 80IA(10) includes an arrangement of understanding between the assessee firm and its partners, whereby no provision was made for salary and interest payable to the partners as per the partnership deed. 3. The Ld. CIT(A) erred in not appreciating that such non-payment of interest and salary amounted to a colourable device aimed at tax evasion even in the hands of the partners, and hence an abuse of the tax incentive provided under section 80IC. 3. Despite service of notice none ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest on capital not paid, were not eligible for deduction under section 80IC of the Income Tax Act,1961. Further interest on FDR was held to be not eligible for deduction under section 80IC of the Act. 6. Before the CIT (Appeals) the assessee contended that the appeal filed by the Revenue on similarissue relating to assessment year 2004-05 was dismissed by the Tribunal in ITA No.766/Chd/2008 vide order dated 26.11.2008. The CIT (Appeals) following the ratio laid down by the Tribunal deleted the disallowance made by the Assessing Officer. The Revenue is in appeal against the same. 7. On perusal of the record we find that during the year under consideration the assessee was held to be eligible to qualify for claim of deduction u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom. A perusal of the said Section, in so far as it is necessary for the present case, reveals that in order to invoke some essential requirements are: a) That there must be close connect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital contribution and therefore, such arrangement between the assessee and its partners have resulted in more than ordinary profits to the assessee. In so far as the first condition is concerned, regarding close connection ostensibly, the same stands fulfilled as the assessee and its partners can be said to have a close connection. The moot question is as to whether there can be said to be an arrangement of transaction of business between the assessee and its partners whereby the assessee earned more than the ordinary profits. A related question is as to whether payment of remuneration and interest on capital contribution to the partners can be said to be an activity falling within the scope of the expression business transacted between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability for such amounts, in our view the Assessing Officer was not empowered to reduce the profits on this score for the purpose of Section 80IA(10) of the Act. 9. The issue raised in the present appeal before us is identical to the issue raised before the Tribunal (supra). Following the ratio laid down by the Tribunal in assessee s own case we uphold the order of the CIT (Appeals) and dismiss the grounds of appeal raised by the Revenue. Ground Nos. 1 to 3 raised by the Revenue are thus dismissed. 10. The issue raised in ITA No.1324/Chd/2010 is identical to the issue raised in ITA No.1323/Chd/2010 and even the facts in both the appeals are identical. In view thereof, grounds of appeal raised by the Revenue are dismissed. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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