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TMI Blog1997 (7) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... rest to the partners of a firm while estimating income on the basis of the aforesaid two provisions. The view impugned as expressed in the circular is at paragraph 4 thereof, and reads as follows: "4. Clause (b) of section 40 lays down restriction on the deduction allowable on account of salary and interest to the partners and is not an enabling section for claiming deduction. The admissible deductions are specifically mentioned under sections 30 to 38 of the Income-tax Act. Hence, sections 44AD(2) and 44AE(3) only state this obvious position by way of clarification. However, in view of the non-obstante clause in sub-section (1) of sections 44AD and 44AE, there is no ambiguity about the intention of the Legislature in this matter and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ows: "44AD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an assessee engaged in the business of civil construction or supply of labour for civil construction, a sum equal to eight per cent. of the gross receipts paid or payable to the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum as declared by the assessee in his return of income, shall be deemed to be the profits and gains of such business chargeable to tax under the head 'Profits and gains of business or profession' : Provided that nothing contained in this sub-section shall apply in case the aforesaid gross receipts paid or payable exceed an amount of forty lakhs r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction. Similar is the case with sub-section (1) of section 44AE. A combined reading of the newly added provisos operating with retrospective effect from April 1, 1994, makes it abundantly clear that the effect of Circular No. 737, dated February 23, 1996, is lost. Consequently assessments made on the basis of the circular cannot stand. They are accordingly vacated. However, the concerned Assessing Officer is free to redo the assessments on the basis of the amended provisions as referred to above. So far as cases where notices are under challenge are concerned, it is open to the concerned assessees to bring to the notice of the Assessing Officer the amended provisions. If it is done, the Assessing Officer shall take note of the same and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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