2018 (6) TMI 93 - AT - Income Tax

Taxability of remuneration and interest received from partnership firm as business income - Held that - We found strength in the arguments of ld. AR on perusal of the Section 28(v) of the Act which specifically mentions that the charge ability of interest income the remuneration of the partners - Interest income and remuneration are as per the provision of Act are taxable as business income Allowability of expenditure as claimed as deduction in the business income - Held that - We find that the assessee s income is chargeable under the business income as discussed above also the assessee is entitled for the claim of expenditure which is wholly exclusively utilized for the earning of above income are allowable. AO has disputed the genuineness of the expenses, therefore, we are of the opinion that the assessee should not be deprived to claim the addition if allowable. Accordingly, we direct the AO to verify the expenditure as claimed on the business income Charging of interest u/s.234A & 234B which is consequential, and the AO is directed to calculate the interest u/s.234A & 234B of the Act as per the law laid down by the Hon ble jurisdictional High Court in case of Ajay Prakash Verma 2013 (1) TMI 140 - JHARKHAND HIGH COURT

Summary

Issues:
1. Validity of initiation of proceedings u/s 147
2. Treatment of remuneration and interest received from partnership firm as business income
3. Allowability of expenses claimed under different heads
4. Charging of interest u/s.234A and 234B

Validity of initiation of proceedings u/s 147:
The appellant challenged the initiation of proceedings u/s 147 as illegal and unjustified, arguing that there was no escapement of income and all information was submitted during the original assessment. However, the Tribunal dismissed this ground as not pressed by the appellant.

Treatment of remuneration and interest received from partnership firm as business income:
The appellant contended that remuneration and interest from a partnership firm should be considered as business income under Section 28(v) of the Income Tax Act, 1961. The Tribunal agreed with the appellant, citing the specific provision of the Act that includes such income as chargeable to income tax under the head "Profits and gains of business or profession." Therefore, the Tribunal allowed this ground of appeal.

Allowability of expenses claimed under different heads:
The appellant claimed expenses of &8377; 4,14,420 deducted from business income received as remuneration and interest from partnership firms. The Tribunal found that the appellant's income was chargeable under business income and held that the expenses wholly and exclusively utilized for earning the income should be allowed. The Tribunal directed the Assessing Officer to verify the expenditure claimed and remit it to the file of the AO, allowing this ground of appeal for statistical purposes.

Charging of interest u/s.234A and 234B:
The Tribunal directed the Assessing Officer to calculate the interest u/s.234A & 234B as per the law laid down by the Hon’ble jurisdictional High Court in a specific case. The appeal of the assessee was partly allowed for statistical purposes, with the Tribunal pronouncing the order on 30/05/2018.