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TMI Blog2011 (5) TMI 962X X X X Extracts X X X X X X X X Extracts X X X X ..... made in accordance with section 80IA(10). 3. The Learned AR for the assessee at the outset pointed out that the issue stands covered by the order of the Tribunal in the case of M.s Navkar Polyplast Company v ITO in ITA NO. 953/Chd/2009 wherein the ground raised by the assessee was allowed. The Learned DR placed reliance on the assessment order. 4. The brief facts of the case are that the assessee is a partnership firm and as per the convents of partnership deed, the four partners of the partnership firm were eligible for interest on their capital accounts at the rate of 12% per annum and also salary to be paid to the partners. However, no such interest and salary was paid to the partners by the assessee firm during the year under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom. A perusal of the said Section, in so far as it is necessary for the present case, reveals that in order to invoke some essential requirements are: a) That there must be close connection between the assessee and the other person; b) That the course of business between them is so arranged that the business transacted between them p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as the first condition is concerned, regarding close connection ostensibly, the same stands fulfilled as the assessee and its partners can be said to have a close connection. The moot question is as to whether there can be said to be an arrangement of transaction of business between the assessee and its partners whereby the assessee earned more than the ordinary profits. A related question is as to whether payment of remuneration and interest on capital contribution to the partners can be said to be an activity falling within the scope of the expression business transacted between them . In our view, the meaning of expression business transacted between them appearing in section 80IA(10) only refers to such transactions which relate to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 8. In view of the aforesaid discussion, we find that the Assessing Officer not only wrongly invoked the provisions of Section 80IA(10) but also erred in interpreting the Partnership Deed so as to hold the assessee liable for reducing its profits on account of remuneration and interest to the partners for the purposes of Section 80IC of the Act. The order of the CIT(Appeals), on this ground is hereby affirmed. Thus, the Revenue fails on Ground No. 1 and 2. 5. The facts of the present case are identical to the facts before Tribunal in M/s Navakar Polyplast Company v ITO (supra) and ITO Vs M/s A.K. Impex (ITA No. 766/Chandi/2008). Following the ratio laid down by Tribunal in ITO Vs M/s A.K. Impex (supra), we find no infirmity in the or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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