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TMI Blog2012 (9) TMI 1231X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Counsel and the learned DR. 3. The issue in Ground No.1 arises on the fact that assessee is in the business of earning commission and brokerage and also a partner in firm. An interest amount of ₹ 3,85,101/- towards interest on loan was claimed in the Profit Loss A/c . AO disallowed the same on the reason that the amount invested was capital employed by the Partner in the firm which is primarily for earning profit which was exempt from tax. AO noted down the capital employed in the firm M/s Gurukrupa Developers and was of the opinion that the interest claim cannot be allowed as a deduction from the brokerage and commission income. The CIT (A) however, did not agree with assessee s contention that the capital in the firm earns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Moody, 115 ITR 519 (SC) to submit that the interest paid on money borrowed for investment is deductible even though the investment did not yield any income during the year and that the expenditure must be laid out or expended wholly and exclusively for making or earning income and not that such income must have been earned during the year. It was the submission that since interest income was offered to tax, the interest claim is an allowable deduction. 5. The learned DR however, relied on the orders of AO and the CIT (A) to submit that assessee has not accounted any interest income which is deemed to have been accrued at12% of the capital balance as per the partnership deed. Therefore, the interest claim cannot be allowed. In reply the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of service tax. AO noticed that assessee accounted the brokerage income after excluding the service tax collected. Further he found debit of ₹ 2,92,800/- in the Profit Loss A/c towards service tax. AO required assessee to furnish the proof of payment for allowing the same since assessee did not pay the balance Service tax before the due date of filing the return. AO invoking provisions of section 43B made entire disallowance of ₹ 4,27,789/-. Before the CIT (A) assessee submitted that he has no objection for disallowance of ₹ 2,92,800/- as the service tax was not shown as income in the Profit Loss A/c, but objected to the addition of ₹ .1,34,989/- as assessee did not debit to the same to the Profit Loss A/c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, relied on the orders of the CIT (A) and submitted that the service tax will become part of the gross receipts of assessee following the decision of the Hon'ble Kolkata High Court in the case of Chowringhee Sales Bureau (P) Ltd vs. CIT (1977) 110 ITR 385 (Cal). 10. We have considered the issue. The Coordinate Bench in the case of ACIT vs. Real Image Media Technologies (P) Ltd (Supra) after analyzing the service tax rules 1994 and other provisions came to the conclusion that the service tax though billed but not received, not having become payable to the credit of the central government by virtue of section 68 of the Finance Act 1994 r.w. service tax rule 1994, the same could not be disallowed under section 43B. Further assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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