Fixed deposit interest and partners' remuneration: Tribunal follows prior year view and allows inclusion in book profit computation.

Interest on bank fixed deposits was held includible in book profit for computing allowable partners' remuneration under section 40(b) of the Income-tax Act, 1961. The Tribunal followed its coordinate Bench decision in the assessee's own earlier years on the identical issue and applied that binding precedent to reject the Revenue's exclusion of such interest as income from other sources. As a result, the recomputation made to disallow part of the partners' remuneration was unsustainable, and the assessee's claim succeeded.

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Issues: Whether interest income from bank fixed deposits could be included in the book profit for the purpose of computing allowable partners' remuneration under section 40(b) of the Income-tax Act, 1961.

Analysis: The interest earned on fixed deposits was treated by the Revenue as income from other sources and excluded while recomputing book profit for disallowing part of the partners' remuneration. The Tribunal noted that the same issue had already been decided in the assessee's own case for earlier years and that the coordinate Bench had directed inclusion of interest on fixed deposits while computing book profit for section 40(b) purposes. Following that view as binding precedent on the identical issue, the Tribunal adopted the same approach.

Conclusion: Interest income from bank fixed deposits was to be included in the book profit for computing partners' remuneration under section 40(b), and the disallowance was not sustainable; the issue was decided in favour of the assessee.

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