TaxTMI 
TaxTMI 
2017 (11) TMI 521
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....IV D?" 4. This Court while admitting the ITA No.537/2011 has framed following substantial question of law: "Whether in the facts and circumstances of the case the ITAT is justified in considering the interest as part of the book profit in contravention of Section 40(b) i.e as per Section 40(b) the book profit has to be computed in the manner laid down in Chapter-IV D?" 5. This Court while admitting the ITA No.22/2015 has framed following substantial question of law: "Whether the Tribunal was legally justified in deleting the disallowance of Rs. 2,30,00,796/- made on account of remuneration to partners by taking the interest earned on FDRs as part of book profit and business income under Section 28 specifically when it was "Income form other sources" and contrary to Section 40(b), Explanation 3 and Section 40(b) (v) (2)?" 6. Counsel for the appellant contended that the Chapter IV-D consist of Section 28 to 44 under heading of profits and gains of business or profession. 7. She has also relied upon Section 40(b)(v) read with Explanation 3 which reads as under:- "40(b)(v) Any payment of remuneration to any partner who is a working partner, which is authorised by, and is i....
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....e contended that the AO after taking into account has rightly assessed the income and held that FD income is not a business income and the reasons adopted by the AO was wrongly set aside by the CIT(A) and it is contended that the Tribunal while considering the matter has observed as under:- "2.Rs.87,55,582/-: 2.1 The ld. CIT(A) erred in law as well as on the facts of the case in confirming the disallowance of the claim of remuneration paid to the partners under Section 40b(v)(2) of the IT Act of Rs. 87,55,582/- (Rs.5,30,95,260/- claimed less Rs. 4,43,39,678/- allowed) by the AO by holding that interest on FDR of Rs. 2,16,07,375/-, was an income under the head 'income form other sources' and not 'income from profits and gains of business or profession', hence will not be a part of book profit for the purpose of Section 40b(v), which is totally contrary to the provisions of law and facts. Hence, such interest income be held and directed to be treated as eligible income being a part of book profit for the purpose of section 40(b). The disallowance so made and confirmed by the ld. CIT(A) being totally contrary to the provisions of law and facts of the case, kindly be deleted in full.....
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....ound, as held earlier, income from bank FDRs etc. cannot said to be business income and the same is to be treated as income from other sources. The following case laws are also replied upon. I Madhya Pradesh State Industries Corporation Ltd. Vs. CIT (1968) 69 ITR 824 (MP). II Shamas Tabrez Vanti (In Re) (2005) 273 ITR 299 the Authority of Advance Ruling. III Murli Investment Company vs. CIT, 167 ITR 368 (Raj.) IV CIT vs. Rajasthan Land Development Corporation 211 ITR 597 (Raj.) V CIT vs. Monarch Tools Pvt. Ltd. (2002) 260 ITR 258. Considering these facts it is argued that the remuneration to partners is calculated as under:- Net Profit as per P& L a/c (Before appropriation) Rs.11,05,67,193/- Less Income chargeable to tax under income from other sources (Interest from bank FDRs) Rs.1,73,21,273/- Interest from other sources Rs.2,88,686/-(-)Rs.1,76,09,959/- Add Donation as per computation (+)Rs.1,68,9604/- Add (+)Rs.1,30,142/- On account of disallownace of vehicle expenses and depreciation on vehicle as per computation Less Interest on capital (-)Rs.1,43,62,637/- Add (Expenses disallowance as per (Para I to I....
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....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 generated out of spare funds invested in the fixed deposit. Such income was declared as part of the business income and that is how even the Assessing Officer had accepted the same. That being the position, and the Assessing Officer in the assessment taxed such income as business income, we do not see any question of law arising. The correctness of the Tribunal's view on the specific issue may be gone into in an appropriate case." 15. He has also relied upon decision in case MD Serajuddin & Brothers vs. Commissioner of Income Tax (2012) 80 DTR 46 (Cal) which reads as under:- "The said chapter nowhere provides that method of accounting for the purpose of ascertaining net profit should be the only income from business alone and not from other sources. Section 29 provides how the income fro....
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....the companies books of accounts as the deemed income for the purpose of a assessing the tax. If we examine the said provision in the above background, we notice that the use of words "in accordance with the provisions of Parts II and III of Sch. VI to the Companies Act" was made for the limited purpose of empowering the assessing authority to rely upon the authentic statement of accounts of the company. While so looking into the accounts of the company, an AO under the IT Act has to accept the authenticity of the accounts with reference to the provisions of the Companies Act which obligates the company to maintain its account in a manner provided by the Companies Act and the same to be scrutinised and certified by statutory auditors and will have to be approved by company in its general meeting and thereafter to be filed before the Registrar of Companies who has a statutory obligation also to examine and satisfy that the accounts of the company are maintained in accordance with the requirements of the Companies Act. In spite of all these procedures contemplated under the provisions of the Companies Act, we find it difficult to accept the argument of the Revenue that it is still ope....
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....wherein it has been observed as under under:- "10. Thus it is clear, that for all purposes, profits and gains of business or profession, and income from other sources, are treated, by the Act to be different species of income. In this backgrounds, s. 2(24) as such, does not categories separately, profits and gains of business or profession. Thus expression "profits and gains" as used in s. 2(24), is wider expression, and is not confined to "profits and gains of business or profession". 11. In this background, the language of s. 10B, again, provide for exemption, with respect to any "profits and gains" derived by the assessee, and is not confined to "profits and gains of business and profession" as provided under s. 14D. 12. Then for the definition of "profits and gains", we are left to seek assistance from other sources. Dictionary meaning, as such, does not provide much of assistance. Then in Re Arthur Average Assocn. For British, Foreign & Colonial Ships, Ex p. Hargorove & Co. (1875), L.R. 10 Ch.App. 545, the meaning of word "gain" has been given as acquisition, and has no other meaning. Gain is something obtained or acquired, and is not limited to pecuniary gain. Regardi....
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....pre), CIT vs. Narendra Doshi (supra) and CIT vs. Shivsagar Estate (supra) clearly applies. We see no 'just cause' as would justify departure from the principle. Hence, in our view the Revenue could not have been allowed to challenge the principle laid down in Lakhanpal National Ltd's case (supra) which was followed by the IAC in the case of the assessee in the three assessment years in question. We are, therefore, of the view that the CIT, the Tribunal and the Calcutta High Court erred in permitting the Revenue to raise a contention contrary to what was laid down by the Gujarat High Court in Lakhanpal National Ltd.'s case. This decision has been subsequently followed by the decisions of the Bombay High Court in CIT vs. Bharat Petroleum Corpn. Ltd. (supra) and the Madras High Court in Chemicals & Plastic India Ltd. vs. CIT (supra) as well as the decision of the Special Bench in Indian Communication Network (P) ltd. vs. IAC (Supra), which have all remained unchallenged." 19. He also drew our attention to Section 115J which reads as under:- "115J. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee being a company (other than....
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....is credited to the [profit and loss account: Provided that, where this section is applicable to an assessee in any previous year (including the relevant previous year), the amount withdrawn from reserves created or provisions made in a previous year to the assessment year commencing of or after the 1st day of April, 1988 shall not be reduced form the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this explanation; or] (ii) the amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the profit and loss account; or (iii) the amounts [as arrived at after increasing the net profit by the amounts referred to in clauses (a) to (f) and reducing the net profit by the amounts referred to in clauses (I) and (ii)] attributable to the business the profits from which are eligible for reduction under section 80HHC or section 80HHD; so, however, that such amounts are computed in the matter specified in sub section (3) or subsection (3A) of Section 80HHC or sub-section (3) of section 80HHD as the case may be; or] (iv) the amount of the....