M/s. B,G.Chitale, V. DCIT, Cir-1, Sangli,

ITA 473/PUN/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3373 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 21-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R KAUSHAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER & SHRI D KARUNAKARA RAO ACCOUNTANT MEMBER ITA 473/PN/09 (A.Y. 2002-03) M/S.B.G.CHITALE APPELLANT A/P-BHILWADI STATION, TAL.PALUS, DIST-SANGLI 416416 PAN AABFB3828J VS. DCIT,CIR-1, SANGLI RESPONDENT APPELLANT BY : SHRI C.H.NANIWADEKAR, C.A. RESPONDENT BY : SHRI R.KAUSHAL, CIT DR ORDER PER: D KARUNAKARA RAO AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE CIT(A) KOLHAPUR, DATED 27.02.2009. THE GROUNDS READ AS UNDER. 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED ON FACTS AND IN LAW IN NOT ACCEPTING THE FACT THAT INTEREST INCOME OF RS.1,56,65,189/- FORMS PART OF BOOKS PROFIT FOR CA LCULATING REMUNERATION TO WORKING PARTNERS U/S.40(B). THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) D ID NOT ACCEPT THE RAJKOT ITAT DECISION IN THE CASE OF ACIT VS. SHETH BROTHERS , 99 TTJ 189 WHEREIN IT HAS BEEN HELD THAT INTEREST INCOME IS VERY MUCH INCLUDABLE IN BOOKS PROFIT TO CALCULATE REMUNERATI ON U/S.40(B) TO WORKING PARTNERS. 2) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS RELIED ON CERTAIN DECISIONS WHICH ARE IN RESPECT OF DEDUCTI ON U/S.80HHC AND WERE NOT RELEVANT IN THE CONTEXT OF SECTION 40(B). 2. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE AO EXCLUDED THE INTEREST INCOME OF RS.1,56,65,1 89/- FROM THE SUM OF NET PROFITS FOR THE PURPOSE OF DETERMINING THE PROFITS ON ACCOU NT OF REMUNERATION U/S40(B) OF THE ACT FOR CALCULATING THE ALLOWABLE DEDUCTION. IN THIS REGARD, LD COUNSEL MENTIONED THAT THE ISSUE UNDER CONSIDERATION STANDS COVERED I N FAVOUR OF THE ASSESSEE BY THE DECISIONS OF VARIOUS BENCHES OF THE TRIBUNAL. LD COUNSEL FOR THE ASSESSEE RELIED ON THE RAJKOT BENCH DECISION OF THE ITAT IN THE CASE O F ACIT VS. SHETH BROTHERS AND READ OUT THE CONCLUSION PORTION OF THE ORDER WHICH IS AS UNDER. WHOLE INCOME EMBEDDED IN THE NET PROFIT AS APPEARI NG IN THE P & L A/C OF THE ASSESSEE-FIRM IS TO BE TAKEN INTO CONSIDERATION FOR ALLOWING DEDUCTION OF ITA 473/PN/09 (A.Y. 2002-03) M/S.B.G.CHITALE 2 REMUNERATION PAID TO PARTNERS UNDER S. 40 (B) WITHO UT EXCLUDING THE INTEREST INCOME WHICH FORMED PART OF THE BOOK PROFIT. 3. FURTHER, THE COUNSEL FOR THE ASSESSEE ALSO RELIE D ON THE DECISION OF JAIPUR BENCH IN THE CASE OF S.P. EQUIPMENT & SERVICES VS. ACIT, 128 TTJ 68, RELEVANT PORTION OF THE CONCLUSION IS READS AS UNDER. NET PROFIT SHOWN BY A FIRM IN ITS P & L A/C IS NOT TO BE CLASSIFIED INTO DIFFERENT HEADS OF INCOME UNDER S.14 FOR THE PURPOSE OF S. 40(B) AND, THEREFORE, INTEREST INCOME IS NOT TO BE EXCLUDED FROM THE NET PROFIT DECLARED BY THE ASSESSEE FOR COMPUTING BOOK PROFIT FOR THE P URPOSE OF DETERMINING THE ALLOWABLE DEDUCTION OF REMUNERATION PAYABLE TO THE PARTNERS UNDER S. 40(B). 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AND THE DECISIONS REPRODUCED ABOVE. IT IS OBVIOUS THAT THE INTEREST INCOME OF RS.1,56,65,189/- IS NOT TO BE EXCLUDED FROM THE NET PROFIT DECLARED BY THE ASSESSEE FOR COMPUTING BOOK PROFIT FOR THE PURPOSE OF DETERM INING THE ALLOWABLE DEDUCTION OF REMUNERATION PAYABLE TO THE PARTNERS UNDER S. 40(B) . THUS, THE GROUNDS RAISED BY THE ASSESSEE SHOULD BE ALLOWED IN ITS FAVOUR. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST SEPTEMBER, 2010. SD/- SD/- (SHAILENDRA KUMAR YADAV) (D. KARUNAKARA RAO) JUDICIAL MEMBER A CCOUNTANT MEMBER PUNE DATED THE 1 ST SEPTEMBER, 2010 ASHWINI COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)- KOLHAPUR 4. CIT-I, KOLHAPUR 5. D.R. ITAT A BENCH 6. GUARD FILE BY ORDER ASSTT. REGISTRAR I.T.A.T PUNE