TMI Blog2000 (5) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... the partners to the profit of the firms. According to the assessees, the interest paid to the partners has been debited in the Profit Loss A/c. The aforesaid interest paid to the partners is nothing but apportionment of the profit of the firms. Therefore, it has to be included in the profit for the purpose of computing deduction under section 32AB of the Income-tax Act. The contention of the assessees was not accepted by the Assessing Officer. According to the Assessing Officer, sub-section (3) of section 32AB has provided the mechanism to be followed for computing deduction under section 32AB of the Act. Interest paid to the partners does not find place in the aforesaid provision. Hence, the claim of the assessees was not accepted. On si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e figure of net profit if the same has been debited to the P L A/c. The relevant portion of the text is quoted below: "5.7 The CBDT have clarified that any amount of interest, salary, bonus, commission of remuneration paid to a partner of the firm should be added back to the figure of net profit if the same has been debited to the profit and loss account. This is on the analogy that such payment is an application of income and is not allowable as deduction in the computation of income under section 40(b) of the Act." The ld. counsel has further placed reliance on the Circular of CBDT being Circular No. 495, dated 22nd September, 1987 which has been reproduced at page 1679 in the Income-tax Laws 5th Edition Volume-I by Chaturvedi and P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been paid. Therefore, there is no reason as to why that part of the profit is not eligible for deduction under section 32AB of the Act. The ld. counsel has further fortified his argument that the payment made to the partners by way of interest cannot be claimed as deduction by the firms under section 40(b) of the Act because it is an apportionment of the profit and that is the reason for inserting the proviso under section 32AB of the Act that deduction is to be allowed in the hands of the firms and not in the hands of the partners. The ld. counsel for the assessees has further placed reliance on Form No. 11A prescribed under the Income-tax Rules for registration of the firm. In the Schedule of the Form under columns 4 and 5, interest, sala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Institute of Chartered Accountants of India. The ld. counsel for the assessees has filed a written objection to the prayer made by the ld. DR. However, more than four months have passed, but nothing could be produced before us by the ld. DR as stated by him in the said application. Accordingly, we are inclined to dispose of the appeals on the basis of material available on record. 6. Having heard both the sides and on perusal of the material on record, we find that the assessees placed heavy reliance on the Guidance Note issued by the Institute of Chartered Accountants of India. Before the Assessing Officer, the same was filed by the assessees. However, the same was not accepted by the authorities below. In the preface of the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been highlighted in the Guidance Note on Audit under section 32AB of the Act by the Institute of Chartered Accountants of India. According to the Note issued by the said Institute, the aforesaid view has been supported by the CBDT. It is true that under section 32AB(3) of the Income-tax Act, it has been provided by the statute that depreciation, income-tax, surtax, etc. mentioned therein are to be added to the profit of the business for the purpose of computing deduction under section 32AB of the Act. However, that provision is based on parts 2 and 3 of Schedule VI to the Companies Act, 1956. It appears that provisions of partnership firm and apportionment of profit amongst the partners, etc. were not taken care of in the aforesaid provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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