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2014 (11) TMI 1280 - ITAT CHANDIGARHDeduction u/s 80IC - CIT(A) held that deduction allowable on the total gross profit without reducing the remuneration and interest payable to the partners - HELD THAT:- deduction under various provisions of this Chapter are allowable only if the income of the nature on which deduction is claimed has been included in the total income and further deduction has to be allowed on the basis of above gross total income. Gross total income has itself been defined in Sec 80B which clearly shows that deduction can be allowed on that income which is computed in accordance with the provisions of the Act before allowing deduction under Chapter VIA. Under Income-tax Act the income has to be computed under various heads as per the provisions of a particular head. Before allowing deduction u/s 80IC the income has to be computed as per the provisions of Sections 32 to 43 of the Act. This position has been confirmed by the Hon'ble Supreme Court in case of CIT V. Kotagiri Industrial Co-operative Tea Factory Ltd. [1997 (3) TMI 1 - SUPREME COURT] Above position has been followed later on in various decisions by the Hon'ble Supreme Court like H.H. Sir Rama Verma [1993 (11) TMI 2 - SUPREME COURT] and Motilal Pesticides (I) Pvt Ltd. [2000 (2) TMI 9 - SUPREME COURT] Therefore it becomes clear that deduction could have been allowed only after computing the income under a particular head. In this case the income in the hands of the a firm was computed in terms of Sec 28 to 43D and Sec 40(b) in respect of allowance of interest and salary falls between these two provisions and therefore full effect has to be given to this provisions also. As later on it was decided not to pay salary and interest to the partners - This does not seems to be correct because before the Assessing officer it was admitted that remuneration and interest has not been paid as per the partnership deed. Further there is no evidence for the same and in any case this will not make a difference - As for making deduction under chapter VIA the profits has to be computed specifically as per a particular provision of a particular head of income because of the definition of gross total income u/s 80B(5). In view of the above clear position the deduction u/s 80IC was allowable only after reducing the interest and remuneration payable to the partners. The Assessing officer has invoked the provisions of section 80IA which are not relevant and the Ld. CIT(A) has decided the issue only on this decision without looking at the specific provisions of the Act and the decision of Hon'ble Supreme Court which are binding on all authorities. Therefore we set aside the order of Ld. CIT(A) and restore that of the Assessing officer (though on a different reasoning). Appeal of the revenue is allowed.
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