Laxmi Vijay Saw Mill & Timber Merchant, Sangli V. Income-tax Officer,

ITA 1925/PUN/2014

• Counselvise Citation: 192524514 RSA 2014
• Duration Of Justice: 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 28-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAZHAR AKRAM
• Keywords: Unexplained investment; Business income; Income from undisclosed sources; Deemed to accrue or arise in india

Judgement Text

INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1925/PN/2014 (ASSESSMENT YEAR 2008-09) LAXMI VIJAY SAW MILL & TIMBER MERCHANT, A/P. VITA ROAD, TASGAON, DIST : SANGLI-416312 .. APPELLANT PAN NO.AAFFS0386N VS. ITO, WARD-1(4), SANGLI .. RESPONDENT ASSESSEE BY : SMT. DEEPA KHARE DEPARTMENT BY : SHRI MAZHAR AKRAM DATE OF HEARING : 25-11-2014 DATE OF PRONOUNCEMENT : 27-11-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 22-08-2014 OF THE CIT(A), KOLHAPUR RELATING T O ASSESSMENT YEAR 2008-09. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN CONF IRMING DISALLOWANCE OF RS.3,18,495/- TOWARDS REMUNERATION TO PARTNERS U/S.4 0(B) IN RESPECT OF INCOME DECLARED DURING SURVEY ON ACCOUNT OF EXCESS STOC K. 2. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN NOT AP PRECIATING THAT THE STOCK DECLARED DURING SURVEY WAS OUT OF ITS INCOME FROM TRADING BUSINESS AND THERE IS NO OTHER SOURCE OF INCOME OF THE APPELLA NT. 3. THE APPELLANT CRAVES TO ADD, ALTER, MODIFY OR SUBST ITUTE ANY GROUND OF APPEAL AT THE TIME OF HEARING. 2 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PARTNERSHIP FIRM CARRYING ON THE BUSINESS AS A TIMBER MERCHANT, FIREWOOD AND LABOUR CHARGES/CUTTING MAJURI ETC., IT FILED ITS RE TURN OF INCOME ON 30-07-2008 DECLARING TOTAL INCOME OF RS.4,60,950/-. IN THIS CASE, A SURVEY ACTION U/S.133A OF THE I.T. ACT WAS CONDUCTE D ON 21-02-2008 DURING WHICH EXCESS STOCK WAS DETERMINED AT RS.7,57 ,410/-. ACCORDING TO THE AO, THE RETURNED INCOME OUGHT TO H AVE BEEN AT RS.12,18,360/-, I.E. NORMAL BUSINESS INCOME OF RS.4 ,60,950/- + DECLARATION DURING THE SURVEY OF RS.7,57,410/-. HO WEVER, THE ASSESSEE HAS COMPUTED THE INCOME AT RS.4,60,950/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE FIRM DISCLOSED THE NET PROFIT AT RS.4,60,950/- AFTE R SALARY TO PARTNERS AND THE SAID NET PROFIT INCLUDES THE DISCLOSURE OF UNRECORDED STOCK OF RS.7,57,410/-. BEFORE ALLOWING THE SALARY TO PARTN ERS AT RS.4 LAKHS THE PROFIT WAS SHOWN AT RS.8,60,950/-. THE SALARY OF THE PARTNERS HAS BEEN CLAIMED BY THE ASSESSEE AFTER CONSIDERING THE VALUE OF UNRECORDED STOCK OF RS.7,57,410/- OFFERED DURING TH E COURSE OF SURVEY ACTION. ACCORDING TO THE AO, THE UNRECORDED STOCK OF RS.7,57,410/- PERTAIN TO UNACCOUNTED INCOME U/S.69 OF THE I.T. AC T, 1961 AND HAS GOT NOTHING TO DO WITH THE PROFIT OF THE BUSINESS A CTIVITIES CARRIED OUT FOR THIS RELEVANT ASSESSMENT YEAR UNDER CONSIDERATI ON AND WHICH IS REQUIRED TO BE ADDED TO THE TOTAL INCOME AS DEEMED INCOME BY VIRTUE OF THE AFORESAID PROVISIONS. THEREFORE, THE SAID DISCLOSED AMOUNT DURING THE COURSE OF SURVEY ACTION CANNOT CO NSTITUTE THE BASIS OF DETERMINATION OF SALARY ALLOWABLE TO THE PARTNER S U/S.40(B) OF THE I.T. ACT. FOR THE ABOVE PROPOSITION, THE AO RELIED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHAMED HAZI HASAN VS. CIT REPORTED IN 247 ITR 290. THE AO ACCOR DINGLY HELD THAT 3 THE ASSESSEE FIRM CANNOT CLAIM THE UNDISCLOSED INCO ME DECLARED DURING SURVEY ACTION U/S.133A OF THE ACT FOR THE PU RPOSE OF COMPUTATION OF ALLOWABLE SALARY TO PARTNERS AS SUCH INCOME PERTAINS TO DEEMED INCOME U/S.69A OF THE ACT AND WAS NOT THE BUSINESS INCOME FOR THIS YEAR. HE ACCORDINGLY RESTRICTED TH E SALARY TO PARTNERS AT RS.81,505/- ON THE BOOK PROFIT OF RS.1,65,384/-, THE CALCULATION OF WHICH IS AS UNDER : PROFIT BEFORE SURVEY : RS.1,65,384/- LESS : INTEREST TO PARTNERS : RS. 67,044/- -------------- BOOK PROFIT : RS. 98,340/- -------------- THEREFORE, REMUNERATION TO PARTNERS IS WORKED OUT AS UNDER : ON THE IST RS.75,000/- @90% : RS.67,500/- ON THE BALANCE OF RS.23,340/- @60% : RS.14,004/- -------------- REMUNERATION ALLOWABLE TO PARTNERS : RS.81,505/- -------------- THE AO ACCORDINGLY DISALLOWED THE EXCESS SALARY CLA IMED TO THE EXTENT OF RS.3,18,495/- (I.E. RS. 4 LAKHS RS.81,505). 4. BEFORE CIT(A) IT WAS SUBMITTED THAT ALL THE EXCE SS STOCK DECLARED DURING THE SURVEY WAS STOCK OF BUSINESS. THE EXCESS STOCK OF TIMBER REPRESENTED CURRENT YEARS BUSINESS INCOM E OF THE ASSESSEE. THIS EXCESS STOCK WAS CREDITED TO THE TRADING ACCOU NT OF THE FIRM AND THE SAID EXCESS INCOME THEREAFTER GOES TO THE PROFI T AND LOSS ACCOUNT OF THE CURRENT YEAR. THEREFORE, THE EXCESS STOCK D ECLARED REPRESENTS BUSINESS INCOME OF THE CURRENT YEAR AND THE ASSESSE E IS ENTITLED TO DEDUCTION OF REMUNERATION U/S.40(B) OF THE I.T. ACT . 4 5. HOWEVER, THE LD.CIT(A) WAS NOT SATISFIED WITH TH E EXPLANATION GIVEN BY THE ASSESSEE AND UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER : 5. ON GOING THROUGH THE APPELLANT'S SUBMISSION AND PERUSING THE ASSESSMENT ORDER I DO NOT FIND MERIT IN THE ARG UMENT THAT THE EXCESS INCOME IS PART OF APPELLANT'S BUSINESS INCOME . ALSO, THERE IS NO EVIDENCE THAT THE EXCESS STOCK REPRESENTS STOCK C ONCEALED DURING THE CURRENT YEAR ONLY AND NOT OVER THE PREVI OUS YEARS. AMOUNT OF INCOME ON ACCOUNT OF EXCESS STOCK IS THE I NCOME WHICH THE APPELLANT HAS CONCEALED OVER LAST YEARS AND UPT O THE DATE OF SURVEY AND INVESTED IN THE STOCK. IT IS UNACCOUNTED INVESTMENT IN STOCK WHICH HAS BEEN ADDED UNDER SECTION 69A BY THE A SSESSING OFFICER. IT IS NOT THE BOOK PROFIT OF THE YEAR. NO REMUNERATION IS ALLOWABLE ON THIS UNACCOUNTED INVESTMENT. APPELLANT 'S CLAIM THAT SINCE SUPPRESSED STOCK WAS PART OF OVERALL PHYSICAL STOCK, IT SHOULD BE TREATED AS BUSINESS INCOME, HAS NO BASIS. EXCESS STOCK IS STOCK WHICH APPELLANT HAS CONCEALED. THIS INCOME IS NOT P ART OF ASSESSEE'S LEGAL BUSINESS OR TAX PAID INCOME. KEEPIN G TOGETHER THE EXCESS STOCK AND THE DISCLOSED STOCK WILL NOT CHANGE THE STATUS OF EXCESS STOCK. STOCK OF DECLARED BUSINESS AND STOCK O F CONCEALED BUSINESS CANNOT BE TREATED ON EQUAL FOOTING. APPELL ANT FIRST HIDES ITS INCOME FROM THE GOVERNMENT AND INVESTS THE. SAME IN STOCK WHICH IS CONCEALED AND WHEN AS A RESULT OF EFFORTS MADE B Y THE DEPARTMENT BY CONDUCTING SURVEY THE STOCK IS REVEAL ED, THE APPELLANT ATTEMPTS TO OFFSET THE SAME BY CLAIMING E XPENSES OF PARTNER'S REMUNERATION. THE SAME CANNOT BE ALLOWED. ADDITION MADE BY THE ASSESSING OFFICER IS SUSTAINED AND GROU NDS TAKEN BY THE APPELLANT ARE REJECTED. 5.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO TH E DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF MD. SER AJUDDIN & BROTHERS VS. CIT REPORTED IN (2012) 210 TAXMANN 84 (CALCUTTA ) SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HEL D THAT CHAPTER IVD OF THE INCOME TAX ACT NOWHERE PROVIDES THAT METHOD OF ACCOUNTING FOR THE PURPOSE OF ASCERTAINING NET PROFIT SHOULD BE TH E ONLY INCOME FROM BUSINESS ALONE AND NOT FROM OTHER SOURCES. SECTION 29 PROVIDES HOW THE INCOME FROM PROFITS AND GAINS OF BUSINESS OR PROFES SION SHOULD BE COMPUTED AND THIS HAS TO BE DONE AS PROVIDED U/S. 3 0 TO 43D. BY 5 VIRTUE OF SECTION 5 OF THE SAID ACT THAT TOTAL INCO ME OF ANY PREVIOUS YEAR INCLUDES ALL INCOME FROM WHATEVER SOURCE DERIV ED. THUS FOR THE PURPOSE OF S, 40(B)(V) READ WITH EXPLANATION THERE CANNOT BE SEPARATE METHOD OF ACCOUNTING FOR ASCERTAINING NET PROFIT AN D/OR BOOK-PROFIT. 6.1 REFERRING TO THE DECISION OF RAJKOT BENCH OF TH E TRIBUNAL IN THE CASE OF ITO VS. JAMANADAS MULJIBHAI REPORTED IN 99 TTJ 197 (RAJKOT) SHE SUBMITTED THAT THE HONBLE TRIBUNAL IN THE SAID DECISION HAS HELD THAT WHERE THE PARTNER OF THE ASSESSEE FIRM NOT ONL Y EXPLAINED THE SOURCE OF INVESTMENT IN THE EXCESS STOCK FOUND DURI NG SURVEY BUT ALSO CREDITED THE SOURCE OF SUCH INVESTMENT BEING INCOME FROM CURRENT YEARS BUSINESS IN ITS PROFIT AND LOSS ACCOUNT AND THE AO HAD NOT DISBELIEVED ASSESSEES CLAIM THAT INVESTMENT WAS OU T OF BUSINESS INCOME DISCLOSED AT THE TIME OF SURVEY, INCOME DISC LOSED AT THE TIME OF SURVEY WAS INCLUDIBLE IN BUSINESS INCOME FOR COM PUTATION OF DEDUCTION U/S.40(B) IN RESPECT OF REMUNERATION TO P ARTNERS. SHE ALSO RELIED ON THE FOLLOWING DECISIONS OF THE PUNE BENCH OF THE TRIBUNAL WHERE IT HAS BEEN HELD THAT THE AMOUNT OF ADDITIONA L INCOME DISCLOSED DURING THE COURSE OF SURVEY U/S.133A OF THE I.T. AC T IS BUSINESS INCOME ELIGIBLE FOR REMUNERATION TO PARTNERS U/S.4 0(B) OF THE I.T. ACT: 1. ITO VS. M/S. METRO WINE SHOP ITA NO.902/PN/2006 ORDER DATED 22-11-2007. 2. M/S. P.G. BHAGWAT VS. ITO ITA NO.1562/PN/2007 OR DER DATED 15- 04-2009. 3. M/S. PROTOVIT FOOD PRODUCTS VS. ITO ITA NO.826/PN /2008 ORDER DATED 29-08-2008. 7. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND WHILE SUPPORTING THE ORDER OF THE LD.CIT(A) RELIED ON THE DECISION OF THE HONBLE CHATTISGARH HIGH COURT IN THE CASE OF DHANU SH GENERAL STORES VS. CIT REPORTED IN 339 ITR 651. 6 8. THE LD. COUNSEL FOR THE ASSESSEE IN HER REJOINDE R SUBMITTED THAT THE FACTS OF THE DECISION RELIED ON BY THE LD. DEPA RTMENTAL REPRESENTATIVE ARE NOT APPLICABLE TO THE FACTS OF T HE PRESENT CASE. IN THAT CASE, THE HONBLE HIGH COURT HAS HELD THAT IF THERE IS ANY UNDISCLOSED INVESTMENT IN BULLION, JEWELLERY OR OT HER VALUABLE ARTICLES WHICH WAS NOT FULLY DISCLOSED IN THE BOOKS OF ACCOU NT, THE CASE WOULD FALL UNDER THE AMBIT OF SECTION 69B. THE SURRENDER ED INCOME OUGHT TO HAVE BEEN TREATED AS DEEMED INCOME UNDER THE PROVIS IONS OF SECTION 69. HOWEVER, THE QUESTION HERE IS REGARDING ALLOWA BILITY OF REMUNERATION TO PARTNERS U/S.40(B) ON INCOME ON ACC OUNT OF EXCESS STOCK DECLARED DURING THE COURSE OF SURVEY. THE HO NBLE CALCUTTA HIGH COURT HAS DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE. SHE ACCORDINGLY SUBMITTED THAT THE GROUNDS RAISED BY TH E ASSESSEE SHOULD BE ALLOWED. 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS RELIED ON BY BOTH THE SIDES. THE ONLY DISPUTE TO BE DECIDED IN THE IMPUGNED APPEAL IS REGARDING T HE ALLOWABILITY OF SALARY U/S.40(B) OF THE I.T. ACT TO THE PARTNERS ON INCOME ON ACCOUNT OF EXCESS STOCK DECLARED DURING THE COURSE OF SURVE Y. IT IS THE CASE OF THE REVENUE THAT SUCH INCOME PARTAKES THE CHARACTER OF DEEMED INCOME UNDER THE PROVISIONS OF SECTION 69A AND IS N OT A PART OF THE BOOK PROFIT FOR ALLOWING REMUNERATION TO PARTNERS U /S.40(B) OF THE INCOME TAX ACT, 1961. IT IS THE CASE OF THE LD. CO UNSEL FOR THE ASSESSEE THAT IN VIEW OF THE PLETHORA OF DECISIONS CITED BY HER, SUCH INCOME IS ELIGIBLE TO BE A PART OF THE BOOK PROFIT AND THE ASSESSEE IS ENTITLED TO COMPUTE REMUNERATION TO PARTNERS U/S.40 (B) ON SUCH 7 INCOME. WE FIND THE ASSESSEE HAS CREDITED SUCH INC OME ON ACCOUNT OF EXCESS STOCK TO THE PROFIT & LOSS ACCOUNT FOR DE TERMINATION OF BOOK PROFIT FOR CALCULATING REMUNERATION TO PARTNERS. T HE AO IN THE ASSESSMENT ORDER HAS ALSO CONSIDERED SUCH INCOME AS BUSINESS INCOME AND NO ADDITION HAS BEEN MADE U/S.69/69A/69B OR 69C. HE HAS ONLY RESTRICTED THE REMUNERATION TO PARTNERS. 9.1 WE FIND THE HONBLE CALCUTTA HIGH COURT WHILE D ECIDING AN IDENTICAL ISSUE HAS OBSERVED AS UNDER : WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE LEAR NED COUNSEL FOR THE REVENUE THAT IT IS SHEER COMPUTATION MISTAKE BASED ON L AW. THIS SUBMISSION HAS NO FORCE AT ALL IN VIEW OF THE LEGAL POSITION OF THE INCOME TAX ACT. CLAUSE (V) OF SECTION 40 AT THAT POINT OF TIME PROVIDED A S FOLLOWS:- (V) ANY PAYMENT OF REMUNERATION TO ANY PARTNER WH O IS A WORKING PARTNER, WHICH IS AUTHORISED BY, AND IS IN ACCORDANCE WITH, THE TERMS OF THE PARTNERSHIP DEED AND RELATES TO ANY PERIOD FALLING AF TER THE DATE OF SUCH PARTNERSHIP DEED IN SO FAR AS THE AMOUNT OF SUCH PAYME NT TO ALL THE PARTNERS DURING THE PREVIOUS YEAR EXCEEDS THE AGGREGA TE AMOUNT COMPUTED AS HEREUNDER:- (1) IN CASE OF A FIRM CARRYING ON A PROFESSION REFERRE D TO IN SECTION 44AA OR WHICH IS NOTIFIED FOR THE PURPOSE OF THAT SECTION (A) ON THE FIRST RS.1,00,000 OF THE RS.50,000 OR AT THE RATE OF BOOK PROFIT OR IN CASE OF A LOSS 90 PER CENT OF THE BOOK PROFIT, WHICHEVER IS MORE; (B) ON THE NEXT RS.1,00,000 OF THE AT THE RATE OF 60 PER CENT; BOOK-PROFIT (C) ON THE BALANCE OF THE BOOK-PROFIT AT THE RATE OF 40 PER CENT; (2) IN THE CASE OF ANY OTHER FIRM (A) ON THE FIRST RS.75,000 OF THE RS.50,000 OR AT TH E RATE OF BOOK-PROFIT, OR IN CASE OF A LOSS 90 PER CENT OF THE BOOK- PROFIT, WHICHEVER IS MORE; (B) ON THE NEXT RS.75,000 OF THE AT THE RATE OF 60 PER CENT; BOOK PROFIT (C) ON THE BALANCE OF THE BOOK PROFIT 8 PROVIDED THAT IN RELATION TO ANY PAYMENT UNDER THIS CLAUSE TO THE PARTNER DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1993, THE TERMS OF THE PARTNER SHIP DEED MAY, AT ANY TIME DURING THE SAID PREVIOUS YEAR, PROVIDE FOR SUCH P AYMENT. EXPLANATION 1.- WHERE AN INDIVIDUAL IS A PARTNER IN A FIRM ON BEHALF, OR FOR THE BENEFIT, OF ANY OTHER PERSON (SUCH PARTNER AND TH E OTHER PERSON BEING HEREINAFTER REFERRED TO AS PARTNER IN A REPRESENTATI VE CAPACITY AND PERSON SO REPRESENTED, RESPECTIVELY), - (I) INTEREST PAID BY THE FIRM TO SUCH INDIVIDUAL OTHE RWISE THAN A PARTNER IN A REPRESENTATIVE CAPACITY, SHALL NOT BE TAKEN INTO ACCO UNT FOR THE PURPOSES OF THIS CLAUSE; (II) INTEREST PAID BY THE FIRM TO SUCH INDIVIDUAL AS P ARTNER IN A REPRESENTATIVE CAPACITY AND INTEREST PAID BY THE FIRM TO THE PERSON SO REPRESENTED SHALL BE TAKEN INTO ACCOUNT FOR THE PURPO SES OF THIS CLAUSE. EXPLANATION 2.- WHERE AN INDIVIDUAL IS A PARTNER IN A FIRM OTHERWISE THAN AS PARTNER IN A REPRESENTATIVE CAPACITY, INTEREST PAID BY THE FIRM TO SUCH INDIVIDUAL SHALL NOT BE TAKEN INTO ACCOUNT FOR THE P URPOSES OF THIS CLAUSE, IF SUCH INTEREST IS RECEIVED BY HIM ON BEHALF, OR FOR THE BENEFIT, OF ANY OTHER PERSON. EXPLANATION 3.- FOR THE PURPOSES OF THIS CLAUSE, BOOK- PROFIT MEANS THE NET PROFIT, AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR, COMPUTED IN THE MANNER LAID DOWN IN CHAPTER IV-D AS INCREASED BY THE AGGREGATE AMOUNT OF THE REMUNERATION PAID OR PAYABL E TO ALL THE PARTNERS OF THE FIRM IF SUCH AMOUNT HAS BEEN DEDUCTED WHILE COMP UTING THE NET PROFIT. THE SAID CHAPTER NOWHERE PROVIDES THAT METHOD OF ACC OUNTING FOR THE PURPOSE OF ASCERTAINING NET PROFIT SHOULD BE THE ONLY INCOME FROM BUSINESS ALONE AND NOT FROM OTHER SOURCES. SECTION 29 PROVIDES HOW THE INCOME FROM PROFITS AND GAINS OF BUSINESS OR PROFESSION SHOULD BE COMP UTED AND THIS HAS TO BE DONE AS PROVIDED UNDER SECTION 30 TO 43D. BY V IRTUE OF SECTION 5 OF THE SAID ACT THAT TOTAL INCOMES OF ANY PREVIOUS YEARS INCLU DES ALL INCOME FROM WHATEVER SOURCE DERIVED. THUS FOR THE PURPOSE OF SECTI ON 40(B)(V) READ WITH EXPLANATION THERE CANNOT BE SEPARATE METHOD OF ACCOUNTING FOR ASCERTAINING NET PROFIT AND/OR BOOK-PROFIT. THE SAID SECTION NOWHERE PROVIDES AS RIGHTLY POINTED BY MR. KHAITAN, LEARNED S ENIOR ADVOCATE THAT THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT NOT THE PROFIT COMPUTED UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION . THE DECISION OF THE SUPREME COURT IN THE CASE OF APO LLO TYRES LTD. V. COMMISSIONER OF INCOME TAX REPORTED IN (2002) 255 ITR 273 (SC) IS AN APPROPRIATE GUIDANCE OF THIS POINT AS TO WHAT SHOULD B E DONE IN ORDER TO ASCERTAIN THE NET PROFIT IN CASE OF THIS NATURE. AT PAGE 280 IN THE FIRST PARAGRAPH OF THE REPORT THE SUPREME COURT OBSERVED A S FOLLOWS:- SUB-SECTION (1A) OF SECTION 115J DOES NOT EMPOWER T HE ASSESSING OFFICER TO EMBARK UPON A FRESH INQUIRY IN REGARD TO THE ENTR IES MADE IN THE BOOKS OF ACCOUNT OF THE COMPANY. THE SAID SUB-SECTION, AS A MATT ER OF FACT, MANDATES THE COMPANY TO MAINTAIN ITS ACCOUNT IN ACCORDANCE W ITH THE REQUIREMENTS OF THE COMPANIES ACT WHICH MANDATE, ACCORDING TO US, IS BODILY LIFTED FROM THE COMPANIES ACT INTO THE INCOME-TAX ACT FOR THE LI MITED PURPOSE OF MAKING THE SAID ACCOUNT SO MAINTAINED AS A BASIS FOR CO MPUTING THE COMPANYS INCOME FOR LEVY OF INCOME-TAX. BEYOND THAT , WE DO NOT THINK THAT 9 THE SAID SUB-SECTION EMPOWERS THE AUTHORITY UNDER THE I NCOME-TAX ACT TO PROBE INTO THE ACCOUNTS ACCEPTED BY THE AUTHORITIES U NDER THE COMPANIES ACT. IF THE STATUTE MANDATES THAT INCOME PREPARED IN ACCORDANCE WITH THE COMPANIES ACT SHALL BE DEEMED INCOME FOR THE PURPOSE O F SECTION 115J OF THE ACT, THEN IT SHOULD BE THAT INCOME WHICH IS ACCEP TABLE TO THE AUTHORITIES UNDER THE COMPANIES ACT. THERE CANNOT BE TWO INCOMES ONE FOR THE PURPOSE OF THE COMPANIES ACT AND ANOTHER FOR THE PURPOSE OF I NCOME-TAX BOTH MAINTAINED UNDER THE SAME ACT. IF THE LEGISLATURE INT ENDED THE ASSESSING OFFICER TO REASSESS THE COMPANYS INCOME, THEN IT WOULD HAVE STATED IN SECTION 115J THAT INCOME OF THE COMPANY AS ACCEPTED BY THE ASSESSING OFFICER. IN THE ABSENCE OF THE SAME AND ON THE LANGU AGE OF SECTION 115J, IT WILL HAVE TO HELD THAT VIEW TAKEN BY THE TRIBUNAL I S CORRECT AND THE HIGH COURT HAS ERRED IN REVERSING THE SAID VIEW OF THE TRIB UNAL. AT PAGE 282 OF THE SAID REPORT THE SUPREME COURT H AS ALSO OBSERVED AMONGST OTHER- THE FACT THAT IT IS SHOWN UNDER A DIFFERENT HEAD O F INCOME WOULD NOT DEPRIVE THE COMPANY OF ITS BENEFIT UNDER SECTION 32AB SO LONG AS IT IS HELD THAT THE INVESTMENT IN THE UNITS OF THE UTI BY THE ASSE SSEE-COMPANY IS IN THE COURSE OF ITS ELIGIBLE BUSINESS. THEREFORE, IN OUR OPI NION, THE DIVIDEND INCOME EARNED BY THE ASSESSEE-COMPANY FROM ITS INVESTMENT IN THE UTI SHOULD BE INCLUDED IN COMPUTING THE PROFITS OF ELIGIB LE BUSINESS UNDER SECTION 32AB OF THE ACT. THUS IT EMERGES AS FOLLOWS: EVEN IF THE INCOME FROM OTHER SOURCES IS INCLUDED I N THE PROFIT AND LOSS ACCOUNTS TO ASCERTAIN THE NET PROFIT QUA BOOK-PROFIT FOR COMPUTATION OF THE REMUNERATION OF THE PARTNERS THE SAME CANNOT BE DISCAR DED. IN VIEW OF THE AFORESAID DISCUSSION AS ABOVE WE, THEREFO RE, ALLOW THIS APPEAL AND WE SET ASIDE ALL THE ORDERS PASSED BY ALL AUTHORITIE S BELOW. THERE WILL BE NO ORDER AS TO COSTS. 9.2 IN VIEW OF THE DECISION OF THE HONBLE CALCUTTA HIGH COURT CITED (SUPRA) WE ARE OF THE CONSIDERED OPINION THAT THE A SSESSEE IS ENTITLED TO COMPUTE REMUNERATION TO PARTNERS U/S.40(B) ON IN COME ON ACCOUNT OF EXCESS STOCK WHICH WAS DECLARED DURING THE COURS E OF SURVEY WHICH WAS TREATED BY THE ASSESSEE AS BUSINESS INCOME. TH E DECISION RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE IS NOT AP PLICABLE TO THE FACTS OF THE PRESENT CASE BECAUSE THE ISSUE WAS NOT FOR THE PURPOSE OF COMPUTATION OF REMUNERATION TO PARTNERS U/S.40(B) O F THE I.T. ACT. IN THIS VIEW OF THE MATTER, WE SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW REMUNERATION TO PARTNERS AS 10 COMPUTED BY THE ASSESSEE. GROUNDS RAISED BY THE AS SESSEE ARE ACCORDINGLY ALLOWED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 27-11-2014. SD/- SD/- (R.S. PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 27 TH NOVEMBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A), KOLHAPUR 4. CIT, KOLHAPUR 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR, ITAT, PUNE BENCHES, PUNE