TMI Blog2018 (5) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... d amount shifts upon the partners and cannot be taken as tax liability of the firm. The applicability of section 28(v) cannot be excluded in the matter of best judgement assessment in respect of an assessee firm. It was the specific case of the assessee that the partners were working partners and they were entitled to salary and interest, as per terms of the deed in accordance with section 40(b). - Decided against revenue. See Indwell Construction [1998 (3) TMI 121 - ANDHRA PRADESH High Court] Addition made on account of payment of EPF beyond specified due date - Non-payment of employees contribution to the account of Government within due date - Held that:- CIT(A) correctly considering the submissions of the assessee restricted the addition, upto ₹ 20,498/- and allowed the remaining portion of the addition on being satisfied the said contribution was paid before the due date of filing of the return of income in terms of the decision of the Hon’ble Supreme Court in the case of Alom Extrusion Ltd. [2009 (11) TMI 27 - SUPREME COURT ] - I.T.A. No. 203/Ran/2014, .T.A. No. 195/Ran/2014 - - - Dated:- 4-5-2018 - Shri J.Sudhakar Reddy, Accountant Member and Shri S.S.Viswanethr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1981- 82 as relied on by the Revenue therein which held that no deduction is available towards payments of interest on capital and remuneration to partners. The Co-ordinate Bench held that the ratio laid down by the Hon ble High Court of Andhra Pradesh is not applicable to the facts and circumstances therein in view of the amendment to statutory provisions of section 40(b) of the Act w.e.f. 1993-94. The relevant portion of which is reproduced herein below: 8. The next contention is with reference to allowance of interest on partners capitals and partners remuneration. Assessee has claimed an amount of ₹ 4,95,401/- as interest on partners capitals and ₹ 84,000/- as remuneration to the partners and arrived at net profit of ₹ 8,87,273/-. Due to variation in the depreciation claims etc., the income offered by assessee as can be seen from the assessment order was at ₹ 6,36,055/-. One of the deductions allowed by the CIT(A) is with reference to remuneration and interest to the partners which was contested by the revenue as not allowable u/s 40(b) relying on the decision of the jurisdictional High Court in the case of Indwell Constructions vs. CIT (232 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers and remuneration paid to the partners as an allowable deduction, subject to certain conditions mentioned in section 40(b) of the Act. Therefore, there is a change in the provisions itself from a disallowance provisions to allowance provisions subject to restrictions. Thus, w.e.f. 1993-94, section 40(b) is enabling a deduction towards interest and remuneration paid to the partners by way of statutory deduction. Therefore, jurisdictional High Court judgment given for A.Y. 1981-82 in the context of the provisions then existing is no longer applicable to the revised assessment procedure. This same view was held by various co-ordinate Benches. In the case of M/s. C. Eswara Reddy and Co. In ITA No. 668 670/Hyd/2009 and cross appeals in ITA No. 685 686/Hyd/2009 for A.Y.s 2003-04 2004-05, the Co-ordinate Bench vide order dated 31.01.2011 held as under: 15. We have carefully gone through the judgement of the jurisdictional High Court in the case of Indwell Construction (supra). The assessment year under consideration before the jurisdictional High Court was assessment year 1981-82. Section 44AD was introduced in the statute book with effect from 01.04.1994. Therefore the jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in a case where the assessee s books of account have been rejected or for any other reasons, whatsoever, best judgment assessment has been made that would entail penalty or adverse civil consequences of depriving the assessee from having the statutory deductions, which would have been otherwise available to him in case his voluntary return filed under section 139(1) has been accepted or regular proceedings under section 143(3) were taken. This interpretation would lead to an anomalous situation, besides the same does not flow from the scheme of assessment under the Act. It is only the method of assessing the income of the assessee firm which either has to be done by accepting the voluntary return filed under section 139(1) or it has to be regularly assessed under section 143(3) or best judgment assessment is to be made under section 144. The final outcome of the assessment of the income of the assessee firm calls for consequential imposition of tax and realisation thereof. The statutory deductions thus which are available to the assessee firm cannot be taken away of snatched away from the firm merely because their books of account have been rejected and best judgment assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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