2021 (7) TMI 280 - AT - Income Tax

Tribunal affirms deletion of disallowances under Section 80(IA)

The Assstt. Commissioner of Income Tax, Circle-1 (2), Surat Versus M/s Arav Diamond

The Assstt. Commissioner of Income Tax, Circle-1 (2), Surat Versus M/s Arav Diamond - TMI Issues:1. Disallowance of deductions under Section 80(IA) r.w.s 10AA(9) for interest on capital and remuneration to partners.2. Justification of higher profits claimed by the firm due to non-provision of interest and remuneration to partners.3. Upholding the order of the assessing officer regarding disallowances.4. Consistency with earlier year's assessment and Tribunal's decision.Analysis:1. The appeal by the Revenue challenged the deletion of disallowances made by the Assessing Officer under Section 80(IA) r.w.s 10AA(9) for interest on capital and remuneration to partners. The Tribunal noted that similar disallowances were made in the assessment for the previous year, but the Ld. CIT(A) had deleted them following relevant judicial precedents. The Tribunal affirmed the decision of the Ld. CIT(A) based on the partnership deed's clear indication that no interest and remuneration were payable, hence dismissing the Revenue's grounds of appeal.2. The Revenue argued that by not providing interest and remuneration to partners, the firm claimed higher profits leading to a higher claim of deduction under Section 10AA, thereby depriving the revenue of due tax. However, the Tribunal found that the partnership deed explicitly stated no provision for interest and remuneration, aligning with judicial decisions that such provisions are not mandatory. Therefore, the disallowance made by the Assessing Officer was deemed erroneous, and the Ld. CIT(A) rightly deleted it.3. The Tribunal considered the facts of the case, emphasizing the absence of any provision for interest and remuneration in the partnership deed. Citing relevant case law and the decision of the Jurisdictional High Court, the Tribunal upheld the Ld. CIT(A)'s deletion of the disallowance. The Tribunal found no valid reason to interfere with the decision and dismissed the Revenue's grounds of appeal, affirming the Ld. CIT(A)'s order.4. Given the consistency with the earlier year's assessment and the Tribunal's decision in the assessee's own case for the previous year, the Tribunal affirmed the Ld. CIT(A)'s order. The Tribunal concluded the hearing by announcing the order in the Virtual Court hearing, upholding the deletion of disallowances and dismissing the Revenue's appeal.This detailed analysis of the judgment highlights the key issues, arguments presented, judicial reasoning, and the final decision rendered by the Tribunal.