2022 (7) TMI 952 - AT - Income Tax

Tribunal allows appeals, directs deletion of interest additions, emphasizes impermissibility of double taxation.

Shri Kishore Kumar Narsapur Versus A.C.I.T. Central Circle 1 (2) Hyderabad

The Tribunal partly allowed both appeals, directing the Assessing Officer to delete the additions of interest on capital and share of profit as they were ... Exemption u/s 10(2A) - share of profit in the partnership firm - addition towards interest received from the firm on the capital deployed in the firm by the Partner - HELD THAT:- A perusal of the computation statement filed along with the return of income by the assessee clearly shows that the income from the business/ profession declared include the interest income and the assessee has separately claimed the profit being share of the profit as exempt u/s 10(2A) - Although these evidences were available with the AO as well as the CIT (A), however, they have not considered the same in the way the same should have been considered. Since the assessee has already offered the income being the interest received from the firm in the return of income filed, therefore, addition of the same again amounts to double addition. We, therefore, set aside the order of the learned CIT (A) on this issue and direct the Assessing Officer to delete the addition. So far as the profit from the firm is concerned, the assessee has already claimed the same as exempt u/s 10(2A) of the Act. Since the share of profit from the firm is exempt u/s 10(2A) of the Act, therefore, we modify the order of the learned CIT (A) and direct the Assessing Officer to delete the addition. Grounds of appeal No.1 & 3 raised by the assessee are accordingly allowed. Issues Involved:1. Addition of interest receivable from a firm already included in the income returned and taxed u/s.115BBE for A.Ys. 2016-17 & 2017-18.2. Justification of confirming the addition by the Assessing Officer and CIT (A).3. Taxing of interest from the firm under u/s.115BBE.4. Double taxation of the same amount by way of addition to the income returned.5. Exemption of share of profit u/s 10(2A) of the Act.6. Assessment being unabated and the absence of incriminating materials.Analysis:Issue 1: Addition of Interest ReceivableIn the case of A.Y 2016-17, the assessee contested the addition of interest receivable from a partnership firm already included in the income returned and taxed u/s.115BBE. The Assessing Officer added the interest amount to the income as unexplained credit. However, the Tribunal found that the interest on capital and share of profit were already declared in the return of income. The Tribunal set aside the CIT (A) order and directed the Assessing Officer to delete the addition of interest, as it amounted to double taxation.Issue 2: Justification of AdditionThe Assessing Officer and CIT (A) confirmed the addition of interest on capital received from the partnership firm. The Tribunal observed that the interest was already disclosed in the return of income. The Tribunal directed the Assessing Officer to delete the addition, as the income was already offered in the return.Issue 3: Taxing of Interest under u/s.115BBEThe Tribunal found the taxing of interest under u/s.115BBE to be incorrect, as the interest from the firm should have been assessed under u/s.28(v) of the I.T. Act, 1961. The Tribunal allowed the appeal and directed the Assessing Officer to delete the addition of interest.Issue 4: Double TaxationThe Tribunal emphasized that adding the same income twice would lead to double taxation, which is impermissible. The Tribunal set aside the CIT (A) order and directed the Assessing Officer to delete the addition, as the income was already declared in the return.Issue 5: Exemption of Share of ProfitThe Tribunal noted that the share of profit from the partnership firm was exempt u/s 10(2A) of the Act. Therefore, the Tribunal directed the Assessing Officer to delete the addition related to the share of profit.Issue 6: Assessment and Incriminating MaterialsThe Tribunal considered the assessment being unabated and the absence of incriminating materials. It emphasized that no addition is called for in such circumstances.In conclusion, the Tribunal partly allowed both appeals filed by the assessee, directing the Assessing Officer to delete the additions of interest on capital and share of profit, as they were already disclosed in the return of income. The Tribunal highlighted the incorrectness of taxing the interest under u/s.115BBE and emphasized the impermissibility of double taxation.