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TMI Blog2022 (10) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessing Officer on account of disallowance of partners' remuneration under Section 40(b) of the Income-tax Act, 1961 ("the Act" in short) is raised by way of the following grounds: "1. Whether on the facts and circumstances of the case and in law the Ld . CIT (A) was justified in directing the A.O. to consider interest income from FDRS and MGVCL for the purpose of computation of book profit, without appreciating that A.O. correctly worked out disallowance of remuneration to partners after recomputing book profit on the basis of adjusted net profit and loss representing profit and gains of business/profession , in accordance with the provision of explanation 3 below section 40(b)(v) of the Act. 2. Whether on the facts and circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer that the assessee has claimed deduction on account of remuneration paid to partners, even in respect of interest income of Rs.2,53,91,100/- on investment in FDRs etc.. According to the Assessing Officer, the said interest income was chargeable to tax under the head "income from other sources" and the same, therefore, could not be taken into account for the purpose of allowing deduction to the assessee on account of remuneration paid to the partners under Section 40(b) of the Act. He accordingly disallowed the claim of the assessee for deduction on account of remuneration to partners to the extent of Rs.1,52,34,661/-. 3. The disallowance made by the Assessing Officer on account of remuneration to partners was challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lved in the Revenue's appeal is squarely covered in favour of the assessee by the decision of this Tribunal rendered in assessee's own case for AY 2012-13 vide an order dated 28.01.2019 passed in ITA No.277/Ahd/2016. A copy of the said order is placed on record before us and perusal of the same shows that a similar issue has been decided by the Tribunal in favour of the assessee vide paragraph Nos. 5 & 6 of its order which read as under:- "5. Heard the respective parties, perused the relevant materials available on record. This is a settled principle of law that the interest income for the purpose of ascertaining ceiling on the basis of book profit, the profit shall be in the profit and loss account. The interest income, thus, cannot be n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t portion of Section 40 reads as under: "Notwithstanding anything to the contrary in [sections 30 to 38], the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",- (a) in the case of any assessee- (b) in the case of any firm assessable as such,- (i) any payment of salary, bonus, commission or remuneration, by whatever name called (hereinafter referred to as "remuneration") to any partner who is not a working partner; or (ii) any payment of remuneration to any partner who is a working partner, or of interest to any partner, which, in either case, is not authorized by, or is not in accordance with, the terms of the partnership deed; or (iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. From the above provision it can be seen that where an assessee is a partnership firm, any payment of salary, bonus, commission or remuneration to its partners under certain circumstances, if it exceeds the limits set out in Clause B, deduction to the extent of excess cannot be claimed. In the present case, such ceiling is prescribed in two slabs. On the first Rs. 30 lacs on the book profit or in case of loss such ceiling is Rs. 1,50,000/- or 90% of the book profit whichever is more. On the balance of the book profit such ceiling prescribed is @ 60%. 6. The question, therefore, arises whether the interest income earned by the assessee-firm from the fixed deposit receipts should be ignored for the purpose of working-out the book profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted." 6. We, therefore, find no infirmity in the order passed by the Learned CIT(A) taking into consideration the order passed by the Co-ordinate Bench and also judgment passed by the Hon'ble Jurisdictional High Court as mentioned therein. Hence, having no infirmity found in the order passed by the Learned CIT(A), we confirm the same." 6. It is thus clear that the issue involved in this appeal of the Revenue is squarely covered in favour of the assessee by the decision of Co-ordinate Bench of this Tribunal in assessee's own case for AY 2012-13 as well as the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. J.J. Industries, [2013] 358 ITR 531 (Guj.). Respectfully following the said judicial pronouncements, we u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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