TaxTMI 
TaxTMI 
2017 (3) TMI 1237
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....48/- 3. At the very outset, the ld.counsel further submitted that since the amounts related to duty draw back and PGVCL license fee are very small amounts, therefore, the assessee does not want to press its claim qua these amounts. Accordingly, the disallowance of deduction under section 80IB(11A) of the Act on these items are concerned, it is confirmed. 4. With regard to the discount, it was contended by the ld.counsel for the assessee that the discount is in respect of purchases. The assessee has accounted the discount availed by it on purchases separately in credit side of the profit & loss account. It is nothing but recorded purchase at lesser price i.e. after discounted price, and therefore, this may be treated as profit derived from industrial undertaking only. The ld.DR, on the other hand, relied upon the order of the AO. 5. On due consideration of the facts and circumstances, we are of the view that a discount is an item by which the assessee has reduced its cost of purchase, i.e. cost of material has been saved which has resulted a little higher profit. Thus, this discount has a direct nexus with activities of the assessee and it is treated as business p....
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....om the bank. The assessee could reduce the net interest expenditure. In other words, if bank has charged 12% and it got subsidy of 5%, then it had charged the rate of 7% on the profit & loss account, then it would have enhanced its profit to this extent, and therefore, this interest subsidy is to be considered as eligible for grant of deduction under section 80IB(11) of the Act. 10. Next issue relates to exclusion of Rs. 32,37,916/- out of eligible profit to claim deduction under section 80IB(11) of the Act. 11. Dispute with regard to this issue is that the AO was of the view that the assessee should pay interest of Rs. 13,47,674/- and remuneration of Rs. 18,90,242/- to the partners as interest on their capital and salary. The assessee was of the view that section 40B only regulates quantum of salary required to be paid to the partners as per the deed. It does not contemplate that if the assessee has not paid salary then it has to be thrust upon the assessee. The ld.AO has thrust upon notional interest payment on the capital contribution and remuneration paid to the partners. He reduced this amount from eligible profits, and thereafter granted deduction. We find that this iss....
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....ant the benefit of house rent allowance, rent fee quarters, motor car or conveyance allowance, medical expenses accident and / or, gratuity, bonus, commission on sales / gross receipts and / or the benefits to the above and / or the partner or partners either on monthly or yearly basis as they may mutually agreed upon. 16.2 We further observe that in clause 9 which relates to interest of partners' capital not exceeding 12% per annum which ends with the line "the partners shall be liberty to increase or reduce above rate of interest from time to time. It is true that clause 10 refers to the execution of a supplementary deed if the partners want to modify the terms relating to remuneration of interest to partners. But in clauses 8 & 9 option has been provided to the partners to modify the amount of remuneration and interest in capital. We further find substance in the submissions of ld. Authorised Representative that particular expenditure relating to interest and remuneration is not compulsorily to be incurred as section 40 of the Act deals with the amount not deductible more specifically section 40(b) deals with disallowance of remuneration beyond specified limit. Providin....
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....of the Act, then also the amount of interest of salary payable to partners could not have been charged as their income in terms of clause (v) of section 28 of the Act. That being so, the folding reached by Id. CIT(A) that the assessee has circumvented tax liability by not claiming the deduction on account of salary, and interest to partners so as to take benefit of set off of brought forward losses will not result into tax evasion but was merely on legitimate tax planning done by the appellant. Keeping in view the overall conspectus of the case, I find no justification in the action of the Id. CIT(A) in upholding the decision of Id. assessing authority in enforcing deduction of interest on capital and remuneration to working partners of the firm while computing the assessable income for the year under consideration. I, therefore, by allowing the ground in appeal, direct the assessing authority to modify the computation of income accordingly. 16.3 We further observe that similar issue also came up before Hon. Jurisdictional High Court in the case of Commissioner of Income Tax vs. Mundra Packaging Industries in Tax Appeal No.615-617 of 2006 wherein following questions of law....