TaxTMI 
TaxTMI 
TaxTMI 
2019 (9) TMI 436
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....e had taken undue benefits of Section10AA by not claiming Interest on Capital and Remuneration to partners which resulted increase in exempted profit of the assessee? 2. Whether on the facts and circumstances of the case and in law, the CIT(A) is justified in not appreciating the fact that by not providing interest and remuneration to the partners, the firm has claimed higher profits leading to higher claim of deduction u/s 10AA of the Act and thus, devoiding the revenue from due amount of tax? 3. On the facts and circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the assessing officer." 3. The above four appeals related to the same issue of invoking provisions of section 80(IA)(10) r.w.s 10AA(9) in giving deductions of interest on capital and remuneration to partner of the assessee firm after finding that the assessee had taken undue benefits of section 10AA by not claiming interest on capital and remuneration to partners which resulted in increase in exempted profit. All parties have agreed to that the facts and circumstances of appeals are identical and similar. For the sake of brevity and convenience, we are taking up of ITA No.192/SRT/2017 as lead....
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.... specifically restricts payment of Interest to Partners on their Capital as well as Remuneration to Partners. This is the main reason why the appellant has not claimed both the expenses against the Business Income shown in Income Tax Return. The ld. CIT (A) further placing reliance on the decisions of ITAT Bench, Ahmedabad in M/s. Sagar Foods and Shreeji Dehydrate Export, 2017 (3) TMI 1297, M/s. Al Reza Food Vs. ITO, Ward-2(4), Bhavnagar 2017(3) TMI 1237 - ITAT Ahmedabad and in the decision of Hon'ble Gujarat High Court in Alidhara Taxspin Engineers, Tax Appeal No.265/2017 dated 02.05.2017 held that the disallowance made by the AO on account of non-provision of interest and remuneration u/s.10AA deduction is erroneous and incorrect in law and facts. The partnership deed clearly lays down that no interest and remuneration is payable and therefore the addition made by the AO is deleted. 6. Being aggrieved, the Revenue has filed this appeal before this Tribunal. The ld.Departmental Representative (the Ld. CIT (DR)] submitted that the Ld.CIT(A) was not justified in deleting the disallowance made by the Assessing Officer by invoking provisions of Section 80(IA)(10) r.w.s. 10AA(9) o....
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.... the tune of Rs. 94,63,66,731/-. The appellant derived income from manufacturing activity and claimed deduction u/s 10AA of Rs. 1,47,67,42,521/-. The AO found that the appellant has not claimed interest and remuneration to the partners from the business income and the supplementary partnership deed executed on 01.02.2010 does not provide any provision for payment of interest and remuneration to partners. The AO relying on the judgment in the case of Meridian Impex 37 taxmann.com 22(2013) by ITAT Rajkot Branch, held that interest and remuneration to partners are allowable though it has not been claimed in the partnership deed. The AO held that non-charging of the interest on the invested capital and no remunerations for the working partners has been done to enhance the profit of the appellant concern which is exempt from taxation and reduce the taxable income of the individual partners to same extent. The AO held that the partnership deed itself is a vehicle of collusive tax avoiding action and relying on the Meridipan Impex (supra) calculated the payment of interest and remuneration to partners and the amount of Rs. 95,05,14,050/- was excluded from the deduction u/s 10AA of the Act....
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....ydrate Export, 2017 (3) TMI 1297. The Hon'ble Bench, in its order dated 22.02.2017, held that the AO could not have compelled the appellant to charge interest or remuneration by invoking section 40(b)(v) of the Act. Similarly in the case of M/s Al Reza Food vs. ITO, Ward-2(4), Bhavnagar 2017 (3) TMI 1237 - ITAT Ahmedabad similar view was taken relying on the judgment in the case of M/s Sagar Food and Shreeji Dehydrate Exports vs. ITO, Ward-2(4), Bhavnagar. In a recent decision of Hon'ble Gujarat in the case of Alidhara Taxspin Engineers, Tax Appeal No.265 of 2017 dated 02.05.2017 held that mere incorporation of interest partners capital account and remuneration does not signify that the same are mandatory in nature. These decisions of the jurisdictional high court and ITAT Bench Ahmedabad are squarely applicable in this case of the appellant. The appellant has not charged any interest and remunerations as per the partnership deed and therefore, the appellant cannot be compelled to charge interest or remuneration. 6.1.5 In view of the above facts, the disallowance made by the AO on account of non provision of interest and remuneration of 10AA deduction is erroneous and inc....
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....is erroneous and incorrect and law and facts as in the peculiar facts of the present case the partnership deed clearly lays down that no interest and remuneration is payable and hence, the first appellate authority right in deleting the disallowance made by the AO on account of nonprovision of interest and remuneration from amount of deduction u/s. 10AA of the Act. We are unable to see any valid reason to interfere with the same and thus, we confirm the same. Accordingly, grounds of Revenue are dismissed. 10. Considering the totality of facts and in the light of the above decision of Tribunal in the case of Ruta Jewels (supra). We find that in the present case, the assessee firm has not charged any interest and remuneration as per partnership deed does not prescribed so, therefore, the assessee firm cannot be compelled to charge interest or remuneration. Therefore, we are inclined to hold the ld. CIT(A) was right in observing that the disallowance made by the AO on account of non-provision of interest and remuneration of cannot be disallowed under section 10AA(9) of the Act. Hence, disallowances so made by the AO are found to be erroneous and incorrect in law and facts as in the p....