TMI Blog2022 (7) TMI 1266X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned reopening noticed issued against assessee was unjustified and same was to be set aside. As twin conditions that the order is erroneous and is also prejudicial to interest of revenue are not satisfied in the instant facts. The issue on the claim of excessive deduction under Chapter-VIA under section 80IB(10) of the Act was specifically raised during the course of assessment proceedings and the assessee had filed detailed reply in response thereto during assessment proceedings. Further, as evident from the above judicial precedents, the view taken by the AO is a legally possible view. Therefore, we find no infirmity in the assessment order. Accordingly, we are of the view that Principal CIT has erred in holding that the order passed by the assessing officer is erroneous and prejudicial to the interest of revenue. Appeal of the assessee is allowed. - ITA No. 75/Rjt/2022 - - - Dated:- 27-7-2022 - Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Assessee : Shri Mehul Ranpura, A.R. For the Revenue : Shri Sanjeev Jain, CIT-D.R. ORDER PER BENCH:- This assessee s appeal for A.Y. 2017-18, arises from order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest at a lower rate. However, during the year, it is noticed that assessee firm is claiming deduction under Chapter-VIA under section 80IB(10) of the Act and claimed deduction amounting to ₹ 35,53,468/-. Therefore, assessee firm is taking advantage of exempt income by not claiming interest on partner s capital as the interest on capital is taxable in the hands of the partners. Therefore, assessee firm has not given any interest on capital as per the terms of partnership deed by claiming higher exempt income. It is further noticed that the assessee firm had not paid interest to the partners in contravention of the express conditions of the partnership deed. Hence, assessee firm had inflated profits eligible for deduction under section 80IB(10) of the Act by not debiting the interest payable to partners as per partnership deed. The eligible interest in the hands of partners on their capital as per the partnership deed was worked out at ₹ 14,04,074/- and accordingly, the assessee firm had inflated its profits from eligible business under section 80IB(10) of the Act to the above extent with the view to claim higher deduction under section 80IB(10) of the Act. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng section 263 of I.T. Act as the twin conditions namely, (i) the order of the Assessing Officer sought to be revised is erroneous and (ii) it is prejudicial to the interest of the revenue are satisfied. The A.O. is directed to make fresh assessment keeping in view the observations made above, after conducting necessary verifications and inquiries and after providing proper opportunity of being heard. 4. Before us, the counsel for the assessee submitted that this issue has been discussed by the assessing officer during the course of assessment proceedings. He drew our attention to pages 9-10 of the paper book (show cause notice issued by the assessing officer dated 24-11-2019) wherein at paragraph 3 of the said notice, the AO had made a specific enquiry on this point. He further drew our attention to reply of the assessee dated 29-11- 2019 at pages 11 to 14 of the paper book. Accordingly, the counsel for the assessee submitted that this issue had been specifically raised by the assessing officer during the course of assessment proceedings and the assessee had duly responded by filing submission dated 29-11-2019, which was considered by the AO while passing the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship deed dated 4-4-1988 and adopted in the supplementary deed as well. From that clause it was evident that the various clauses of partnership deed which authorized the partners to charge interest on their capital and remuneration to the working partners could be varied or amended either verbally or even by conduct. It was not necessary for the parties to have reduced such terms to writing in case they desired not to charge any interest or remuneration as such. From the conduct of parties it was evident that they had acted in terms of clause No. 11 of the partnership deed. The Assessing Officer, therefore, could not have compelled the assessee to charge such interest or remuneration by invoking section 40(b)(v), more particularly when it was not mandatory but discretionary for the assessee to have made such a claim. 5.1 We note that in the case of Myhome Developers v. ACIT [2021] 129 taxmann.com 120 (Gujarat) , assessee was a partnership firm engaged in activity of developing housing projects. The assessment in case of assessee was sought to be reopened on ground that assessee had claimed excessive deductions under section 80-IB(10), without providing interest on capital an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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