TaxTMI 
TaxTMI 
2011 (11) TMI 740
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....T (A) has erred in deleting the addition of Rs. 7,53,650/- made by the A.O. by disallowing deduction claimed under section 80IC to this extent even though the disallowance was mandated by the provisions of section 80IA(10). 2. The CIT (A) has erred in not appreciating that the expression "business transacted" appearing in section 80IA(10) includes an arrangement of understanding between the assessee firm and its partners, whereby no provision was made for salary and interest payable to the partners as per the partnership deed. 3. The Ld. CIT(A) erred in not appreciating that such non-payment of interest and salary amounted to a colourable device aimed at tax evasion even in the hands of the partners, and hence an abuse of the tax ince....
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....Rs. 7,50,000/- i.e. Rs. 4,80,000/- on account of salary not paid to the working partners and Rs. 2,70,000/- as interest on capital not paid, were not eligible for deduction under section 80IC of the Income Tax Act,1961. Further interest on FDR was held to be not eligible for deduction under section 80IC of the Act. 6. Before the CIT (Appeals) the assessee contended that the appeal filed by the Revenue on similarissue relating to assessment year 2004-05 was dismissed by the Tribunal in ITA No.766/Chd/2008 vide order dated 26.11.2008. The CIT (Appeals) following the ratio laid down by the Tribunal deleted the disallowance made by the Assessing Officer. The Revenue is in appeal against the same. 7. On perusal of t....
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....th of Section 80IA(10) which we reproduce herein after : "80IA(10) - Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom." A perusal of....
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....e assessee more than the ordinary profits. In the present case, the charge of Assessing Officer is that the assessee has not debited any expenditure on remuneration to its partners and interest on partners' capital contribution and therefore, such arrangement between the assessee and its partners have resulted in more than ordinary profits to the assessee. In so far as the first condition is concerned, regarding close connection ostensibly, the same stands fulfilled as the assessee and its partners can be said to have a close connection. The moot question is as to whether there can be said to be an arrangement of transaction of business between the assessee and its partners whereby the assessee earned more than the ordinary prof....