Notional partner income cannot be taxed where partnership deed terms were enabling only and no accrual or receipt occurred.

Interest on capital and remuneration mentioned in an enabling partnership deed could not be taxed in the partner's hands where no such amounts were in fact provided, received, or accrued. Section 80IA(10) read with section 80IB(13) permits recomputation of eligible business profits for deduction purposes when profits are inflated, but it does not authorise addition of notional income in the hands of a person who never received or became entitled to it. On these facts, the addition was unjustified and the Revenue's challenge failed.

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Issues: Whether interest on capital and remuneration said to be payable under the partnership deed could be treated as the partner's taxable income when neither amount had in fact been provided or received, and whether section 80IA(10) of the Income-tax Act, 1961 permitted addition of such amounts in the partner's hands.

Analysis: The partnership deed used enabling language and did not mandate payment of interest or remuneration. The accounts of the firm showed that no such amounts had been provided. Section 80IA(10), read with section 80IB(13) of the Income-tax Act, 1961, was held to empower recomputation of the eligible business's profits where ordinary profits were inflated, but not to fasten income in the hands of a person who had neither received nor accrued such amounts. On the facts, the amounts had not accrued or arisen to the partner.

Conclusion: The addition of interest on capital and remuneration in the assessee's hands was unjustified and the Revenue's challenge failed.

Final Conclusion: The appellate relief granted to the assessee was sustained and the Revenue's appeal was rejected.

Ratio Decidendi: Amounts not mandatorily payable under an enabling partnership deed and neither received nor accrued cannot be taxed in the partner's hands merely because the firm's profits were recomputed for deduction purposes under section 80IA(10) read with section 80IB(13) of the Income-tax Act, 1961.

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