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TMI Blog2021 (3) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... nce that, the assessee had to pay interest on capital and remuneration to its partners. Even after 01.04.2009, interest on capital as well as the remuneration were not to be paid to the partners. No material on record to indicate that, the writ applicant has actually received any interest on capital and remuneration from the partnership firm. Record further indicates that, for the assessment year 2010-11[ 2015 (8) TMI 1160 - ITAT AHMEDABAD ] deduction u/s 80 IB(10) was claimed without paying any interest on capital and remuneration to partners and such claim was not disturbed by the assessing officer. In this view of the matter, the conclusion arrived at by the assessing officer that, the assessee has claimed deduction without providing interest on capital and remuneration to partners as per the clause 6 and 7 of the deed, has escaped assessment on account of failure on the part of the assessee in filing of the return of income disclosing fully and truly all material facts are contrary to law and without jurisdiction. We hold that, the contention raised by learned Sr. counsel Mr. Hemani merits consideration that mere incorporation of clauses in the partnership deed for interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment and assessment under Section 143 of the Act was framed vide order dated 20.03.2013, whereby, income of ₹ 76,25,000/- disclosed by the writ applicant during the course of survey was stated as income from other source as against Business Income and accordingly, the claim for allowing deduction under Section 80IB (10) of the Act on such income was denied and the same was challenged in appeal before the Commissioner of Income Tax (Appeals), who vide order dated 28.08.2014 was pleased to dismiss the appeal. The order of CIT was challenged before the Income Tax Appellate Tribunal and the Tribunal vide order dated 07.08.2015 in appeal bearing Income Tax Appeal No.2966/Ahd/2014 hold that, the income of ₹ 76,25,000/- disclosed during the survey was income from business and the writ applicant is eligible for deduction under Section 80 IB (10) of the Act on such income. 3.3 Thereafter, the impugned notices having been issued by the respondent on 26.03.2018 under Section 148 of the Act seeking to re-open the case of the writ applicant for the A.Y 2011-12, 2012-13 and 2013-14. 4. In the aforesaid facts, we may summarize the case in details of the respective year as under: 4.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same was not paid as per partnership deed. 5. As the assessee has claimed deduction u/s.80 IB (10) of the I.T.Act of ₹ 15,78,260/- without providing interest on capital and remuneration to partners for entire year as per clause 6 7 of partnership deed dated 23.01.2008, the assessee has claimed deduction excessively which resulted in under assessment of ₹ 15,78,260/- which has escaped assessment on account of failure on the part of the assessee in filing of return of income disclosing fully and truly all necessary material facts. 4.3 SCA No. 208 53 /2018 :- The writ applicant filed its return of income for A.Y. 201 3 -1 4 on 03.10.2013 declaring total income of Rs. Nil after claiming deduction of ₹ 25,98, 219/- under Section 80 IB (10 ) of the Act. In response to the notice issued under Section 148 of the Act, the writ applicant filed its return of income for the year under consideration on 14.04.2018 and at the request of the writ applicant, reasons recorded have been furnished to the writ applicant which reads as under: 3. On further verification of partnership deed executed on 23.01.2008, the clauses 6 7 provided payment of interest to partners @ 12% on capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o indicate that, partners actually received interest on capital or remuneration, merely provision made in the partnership deed does not signify that, it is mandatory in nature. (ii) It was submitted that, the case of the writ applicant for the assessment year 2010-11 was also selected for scrutiny assessment and in the said assessment year, deduction was claimed without payment of interest on capital and remuneration to the partners and it was not disturbed by the Revenue. Therefore, in view of the principles of consistency, the revenue could not have taken a different stand in the subsequent years and on this ground, the notices deserve to be quashed. (iii) It was further submitted that, the action of re-opening is not justified because the income earned by an assessee from the eligible business is exempt under Section 80IB (10) of the Act. Therefore, whether a particular expenditure is claimed as a deduction or not would not alter the character of income eligible for deduction under Section 80 IB (10) of the Act. (iv) It was submitted that, the assessment for the year under consideration was framed under Section 143(3) of the Act and same is sought to be re-opened beyond the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. However, the use of this power is conditional upon the fact that, the assessing officer has some reason to believe that, the income has escaped assessment. Where an assessment under Section 143 or 147 of the Act has been made for the relevant assessment year, no action shall be taken after expiry of 4 years unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to the notice issued under sub-section 1 of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment. 13. We take the notice of the fact that, the applicant firm My Home Developers is a partnership firm engaged in the construction business and the said firm came into existence w.e.f. 15.06.2007 and partnership deed was executed on 27.06.2007 and thereafter, due to change in the constitution in the partnership firm, another deed replacing the earlier was executed on 01.04.2008 and lastly, partnership deed was amended w.e.f. 01.04.2009. It is not in dispute that, earlier there was a clause in the deed as to payment of interest on capital, but no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot appreciating the fact that by not providing interest and remuneration to the partners, the firm has claimed higher profits leading to higher claim of deduction u/s 80IB of the Act and thus, devoiding the revenue from due amount of tax? (B) Whether on the facts and circumstances of the case and in law, the Hon ble ITAT was justified in not appreciating that the Section 80IB(10) enables AO to re-compute the profit of undertaking claiming deduction u/s 80IB i.e. the partnership firm as in the present case and not the case of partner s admissibility towards interest/ remuneration as held in the case of Smt. Mala Tandon? Conclusion :- On interpretation of the partnership agreement and considering the wish of the partners reflected in the partnership deed, not to pay/charge interest on the partners capital and the remuneration, the learned tribunal has rightly deleted the dis-allowance made by the Assessing Officer with respect to the deduction claimed under Section 80IB of the Income Tax Act. As rightly observed by the learned tribunal, mere incorporation of interest on the partners capital and remuneration does not signify that the same are mandatory in nature. We concur with the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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