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TMI Blog2012 (12) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... or considering financial charge receipts as Business Income. 2. On the facts and circumstances of the case Ld. CIT(A) erred in law in confirming financial charge Receipts of Rs.45,52,483/- as income from Income from Other sources. 3. Ld. CIT(A) erred in law in confirming additions of Rs.18,17,932/- on account of excess remuneration claimed. 2. Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) of the Act dated 23.12.2010 were that the assessee firm is trading in Iron & Steel. It was noticed by the AO that the assessee had shown financial charges of Rs.45,52,483/-. As per AO those financial charges were treated by the assessee as "business income". While claiming the remuneration to partners the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed [Annexure-5]. Interest earned from M/s. Dev Deep Builders Pvt. Ltd. & Dev Arcade Pvt. Ltd. is out of above said business related transactions and therefore the same was rightly shown as trading receipt. You are therefore requested to allow remuneration to partners as claimed in I.Tax return & oblige." 3. The AO was not convinced and held that the financial charges are earned as per the provisions of section 56 of I.T. Act. The AO has concluded that the assessee was not entitled to include such interest receipts while working the amount of remuneration to partners u/s.40(b) of IT Act. The AO has re-worked out the remuneration available to partners at Rs.4,82,068/- as against the claim of Rs.23 lacs, hence balance of Rs.18,17,932/- d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid borrowings. Ld. AR has mentioned that the assessee-firm had paid total interest of Rs.84,81,568/- as against that interest received was only Rs.54,03,578/- . In the interest account, thus, there was a deficit of interest of Rs.30,77,990/-. He has therefore submitted that there was no occasion on the part of the AO to hold that financial charges received as interest were of Rs.45,52,583/- for the purpose of reduction out of the "book profit". It was not the correct position as per the accounts because under that account there was a deficit as per books. He has therefore pleaded that the disallowance was wrongly made and placed reliance on SP Equipment & Services vs. ACIT, ITA No.464/Jp/07 order dated 30/09/2009. 6. From the side of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been invested nor it is case of short term deposit so as to treat the interest income under the head "other sources". Undisputedly, it is correct that the assessee is not in a money lending business but the transaction was nothing but dove-tailed with the business activity of the assessee. We have come across a decision of ITAT Rajkot Bench pronounced in the case of ACIT vs. Sheth Brothers [2006]99 TTJ 189(Raj.), wherein the Respected Co-ordinate Bench has expressed that the income which is embedded in the net profit and shown as income in the profit and loss account of the firm can be taken into consideration for allowing deduction of remuneration to partners u/s.40(b) of I.T. Act without excluding the interest income and that the prof ..... X X X X Extracts X X X X X X X X Extracts X X X X
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