2012 (11) TMI 1106 - AT - Income Tax

Summary

Issues involved: Appeal against common order of CIT(A)-VI, Hyderabad for assessment years 2008-09 & 2009-10 regarding deduction u/s 40(b) for interest and remuneration paid to partners.

Summary:
The appeals were filed by the revenue against the CIT(A)'s order for the assessment years 2008-09 & 2009-10. The Assessing Officer had estimated the net profit for the assessee firm at 8% of the turnover, rejecting the books of account and including remuneration and interest paid to partners in the estimation. The CIT(A) directed the Assessing Officer to allow deduction u/s 40(b) for interest and remuneration paid to partners from the estimated income. The revenue contended that all expenses and deductions, including remuneration and interest, were accounted for in the estimation of net income. The issue was whether the Assessing Officer should allow deduction u/s 40(b) for interest and remuneration paid to partners from the estimated income.

The Tribunal noted that the issue was covered by a decision of the jurisdictional coordinate bench in a similar case. The Tribunal cited the proviso to section 44AD(2) which allows deduction of salary and interest paid to partners subject to limitations u/s 40(b) of the Act. Referring to previous decisions and the provisions of section 44AD, the Tribunal upheld the CIT(A)'s order directing the Assessing Officer to allow deduction u/s 40(b) for interest and remuneration paid to partners from the estimated income. The Tribunal dismissed the revenue's appeal and the cross objections filed by the assessee as infructuous.

In conclusion, both the revenue's appeals and the assessee's cross objections were dismissed, affirming the CIT(A)'s order to allow deduction u/s 40(b) for interest and remuneration paid to partners from the estimated income.