TMI Blog2008 (3) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... delivered by Rakesh Kumar Garg J.— The Revenue has filed the present appeal under section 260A of the Income-tax Act, 1961 (for short "the Act"), against the order of the Income-tax Appellate Tribunal, Chandigarh Bench "A" Chandigarh (for short "ITAT"), dated January 25, 2007, passed in I. T. A. No. 261/CHANDI/2005 for the assessment year 2001-02 raising the following proposed substantial question of law : "Is the hon'ble Income-tax Appellate Tribunal, in the facts and in the circumstances of the case legally correct in allowing interest and salary to partners when there is a clear finding of fact that books of account are maintained on cash basis and that no payments have been made to the partners ?" 2 . The respondent is a firm a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals) upheld the application of the flat rate of 12 per cent. on the contract receipts in respect of the difference in contract receipts of Rs. 15,08,181. The appellate authority held that instead of assessing the entire amount of difference in receipts as income of the assessee, a profit of 12 per cent. be computed. In regard to the payment of salary and interest to the partners, it was held that since the Assessing Officer had rejected the book results and applied a rate of 12 per cent. on gross receipts, deduction on account of salary and interest as permissible to the assessee on the basis of the terms and conditions of the partnership deed. 4. Aggrieved against the said order, the Revenue filed the appeal before the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties in the end of the financial year. Since the assessee is maintaining its books of account under the cash system of accounting, deduction on account of salary and interest to be paid to the partners was allowable as per the partnership deed. In this regard, the assessee had also relied upon the Board Circular No. 739 dated March 25, 1996 (see [1996] 218 ITR (St.) 131), which is not disputed by the Department. In regard to the assessment of income pertaining to difference in receipts, the profit having been determined by application of a flat rate, the difference in payments, does not justify the different treatment. It is not a case of an assessee, who has maintained regular books of account and the result disclosed having been accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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