AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (12) TMI 123
X X X X Extracts X X X X
X X X X Extracts X X X X
....owing grievance:- "The learned CIT(A) has erred in law and on facts in upholding the disallowance made by the learned Assessing officer, under section 40b of the Income Tax Act, 1961, of Rs. 7,03,921/-." 3. The issue in appeal lies in a narrow compass of material facts. During the course of assessment proceedings, the Assessing officer noticed that the assessee has earned interest income of Rs. 20,14,571/- by investing surplus funds and that the interest so earned by the assessee can only be taxed as "income from other sources". As a corollary to this finding, learned CIT(A) was also of the considered view that interest income is to be excluded from computation of permissible remuneration of partners. It was for these reasons th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the firm. 2.3 It is evident from the definition of book profit as given in the aforesaid Explanation-3 that the profit and loss account for the purposes of book profit will be computed in the manner laid down in Chapter IV-D of the Act. As per Chapter IV-D of the Act, the income and expenditure as mentioned in sec. 28 to 44DB will be considered for arriving at the profits and gains of business or profession. The Assessing Officer had noticed that the assessee had shown interest income of Rs. 20,14,571/- as business income in the profit and loss account and claimed the partners' remuneration on the said income. The assessee was enjoying the interest income of Rs. 20,14,571/- from M/s Kothari Finance which cannot be considered ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... other sources and not business income. Similar view was taken by the Hon'ble MP High Court and Hon'ble Madras High Court respectively in the cases of Ferro Concrete Construction (India)(P) Ltd. Vs. CIT 290 ITR 713 (MP) and CIT vs. Monark Tools (P) Ltd. 260 ITR 258 (Mad.). The Hon'ble Delhi High Court in their later on decisions had also taken the view that interest income is assessable as income from other sources. In the case of CIT v. Shri Ram Honda Power Equip. (Delhi) 289 ITR 475 (Delhi), the Hon'ble Delhi High Court had held that where surplus funds are parked with the bank and interest is earned there on it can only be categorised as income from other sources. The other category is where the exporter is required to ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....14,90,000/- - Rs. 7,86,079/-) and his finding is confirmed. The addition so made is sustained. Both the grounds of appeal are accordingly dismissed." 4. The assessee is still aggrieved, and is in further appeal before us. 5. We have heard the rival contentions, perused the material on record and duly considered the facts of the case in the light of the applicable legal position. 6. We find that the issue in appeal is now squarely covered by the judgement of Hon'ble jurisdictional High Court in the case of CIT vs. J J Industries (358 ITR 531) wherein Their Lordships have upheld the Tribunal's stand to the effect that for the purpose of ascertaining ceiling on the basis of book profit, the profit shall be in the profit and lo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the partnership deed, but which relates to any period (falling prior to the date of such partnership deed) for which such payment was not authorized by, or is not in accordance with, any earlier partnership deed, so, however, that the period of authorization for such payment by any earlier partnership deed does not cover any period prior to the date of such earlier partnership deed; or (iv) any payment of interest to any partner which is authorized by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as such amount exceeds the amount calculated at the rate of [twelve] per cent simple interest per annum; or (v) any payment of r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....such ceiling on the basis of book profit, the profit shall be in the profit and loss account and is not to be classified in the different heads of income under Section 40 of the Act. The interest income, therefore, cannot be excluded for the purposes of determining the allowable deduction of remuneration paid to the partners under Section 40B of the Act. 8. Counsel for the revenue vehemently contended that for the purpose of ascertaining the limit, only business income would be relevant and not any other income. In the present case, however, we need not enter into such controversy. The assessee had held out that it is in the business of purchasing raw cotton and ginning the same. It is a seasonal business. The interest income was g....