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TMI Blog2019 (12) TMI 1111X X X X Extracts X X X X X X X X Extracts X X X X ..... to partners from the assessed income. 3. Briefly stated, the facts of the case are that a survey operation was conducted at the business premises of the assessee on 11.09.2014. In the aftermath of survey, the ld. counsel for the assessee declared net profit @ 8% of gross turnover, over and above the returned income as per return filed on 30.09.2012. 4. During the course of scrutiny assessment proceedings, the assessee was confronted with the impounded documents pursuant to which the assessee filed detailed reconciliation statement, which has been exhibited at pages 3 to 7 of the assessment order, and through this reconciliation statement, explained the cash expenses of Rs. 10.39 lakhs being below the permissible limit of Rs. 20,000/- and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided, which are placed at pages 9 to 16 of the paper book. 10. Per contra the ld. DR strongly supported the findings of the Assessing Officer. It is the say of the ld. DR that once profit is estimated , all these expenses are deemed to be allowed and, therefore, no further deduction should be allowed to the assessee. 11. We have given thoughtful consideration to the orders of the authorities below. We find that partnership deed dated 01.05.2008 at clause 8 contains provision for interest on capital @ 12% per annum and clause 17 provides for remuneration to whole time working partners and method of computation of remuneration is also provided. 12. Vide supplementary deed dated 01.04.2010, manner of paying remuneration to whole time worki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation given by the revenue is accepted, it would mean that in a case where the assessee's books of account have been rejected or, for any other reason, whatsoever, best judgment assessment has been made, that would entail penalty or adverse civil consequences of depriving the assessee from having the statutory deductions, which would have been otherwise available to him, in case his voluntary return filed under Section 139(1) has been accepted or regular proceedings under Section 143(3) of the Act were taken. This interpretation would lead to an anomalous situation, besides the same does not flow from the scheme of assessment under the Act. It is only the method of assessing the income of the assessee firm which either has to be done by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of M/s B. Durga Reddy & Co. in ITA Nos. 713 to 715/VIZ/2013 also had the occasion to consider similar issue. The relevant findings of the co-ordinate bench read as under: "12. The next issue emanated from the revenue appeal is deductions towards interest on capital and remuneration to partners. The A.O. did not allow the deductions towards remuneration to partners and interest on partner's capital accounts. The Ld. D.R. submitted that once net profit is estimated, no separate deductions towards interest on partner's capital and remuneration to partners is allowable as a deduction. The Ld. D.R. further submitted that the CIT(A) ought to have appreciated the fact that the interest on capital and remuneration to partners are not allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... muneration to partners, when net profit is estimated from the contract receipts. 14. We further noticed that the coordinate bench of this Tribunal, in the case of Srivalli Shipping & Transports in ITA Nos.79 to 95/Vizag/2013 held that separate deductions towards interest on partner's capital account and remuneration to partner should be allowed when net profit is estimated. The relevant portion of the order is reproduced hereunder: "24. On consideration of rival contentions, we find merit in the submissions made by the assessee. The capital expenditure incurred is not allowed as deduction, but the deterioration in their value is allowed as deduction with the name "depreciation". Hence, it is called noncash expenditure and also called st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undry in ITA Nos.370 & 409/Vizag/2012. The coordinate bench of this Tribunal, under similar circumstances held that interest on partner's capital account and remuneration to partners is allowable deductions when net profit is estimated. The relevant portion is reproduced hereunder: TAXPUNDIT.ORG ITA Nos.713 to 715 & 721 to 723/Vizag/2013 M/s. B. Durga Reddy & Co., Visakhapatnam 17 17. Therefore, respectfully following the view expressed by the Hon'ble jurisdictional High Court and also considering the coordinate bench decision of this Tribunal, we are of the opinion that depreciation is a allowable deduction, even after estimation of net profit from the contract receipts. Therefore, we direct the assessing officer to allow the depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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