TaxTMI 
TaxTMI 
2020 (1) TMI 925
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....tances of the case and in law, the Hon'ble ITAT's order is correct when in fact the exemption u/s. 10AA of the IT Act should be based on total income to be computed as per the provisions of section 29 to 43D of the Act, after allowing all eligible deductions whether or claimed suo-moto by the assessee or not? 1(b) Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT is right in upholding the decision of Ld. CIT(A) in deleting the disallowance made by the Assessing Officer without appreciating that assessee firm had taken undue benefits of section 10AA of the Act by not claiming interest on Capital and Remuneration which resulted into increase in exempt profit of the assessee-firm? 2(a) Whether on the facts and in the circumstances of the case and in law, the decision of the Hon'ble ITAT is perverse in upholding the decision of Ld.CIT(A) in deleting the disallowance made by the Assessing Officer without ascertaining the facts as narrated by the Assessing Officer in as much as there was a partnership deed by which the firm was constituted on 10.07.2007 and the same was modified after receiving LOA from the office of the Development Commissione....
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....ovision 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 Meridian Impex (supra) calculated the payment of interest and remuneration to partners and the amount of Rs. 896973755/- was excluded from the deduction u/s 10AA of the Act. The AO had restricted the claim of deduction u/s 801A(10) to the tune of Rs. 48,00,74,621/- as against the total claim of deduction of Rs. 1,37,57,13,846/- on account of interest to partners and partners remuneration. The appellant submitted that the AO's finding is incorrect as it was clearly mentioned in the supplementary partnership deed that ....
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.... taken relying on the judgment in the case of M/s Sagar Food and Shreeji Dehydrate Exports verses ITO, Wd-2(4), Bhavnagar. In a recent decision of the Hon, Gujarat High Court in the case of Alidhara Taxspin Engineers, Tax Appeal No. 265 of 2017 dated 02.05.2017 held that mere incorporation of interest on 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 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 and the grounds of appeal is allowed. 6.2.1. The Grounds of appeal-Ground No. 1 pertains to reopening the assessment proceedings u/s 148 r.w.s 147 where the reason ....
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....unt of non-provision of interest and remuneration from amount of deduction under section 80lA(10) read with section 1OAA(9) of the Act. We further observed that the issue is covered by the decision Co-ordinate Bench of ITAT Surat in favour of the assessee in the case of Ruta Jewels (supra) and no reason to deviate with the finding of Ld. CIT(A), accordingly same is upheld. Thus, the grounds of appeal of the Revenue are dismissed. We are unable to see any valid reason to interfere with the order of learned CIT (A) it and thus, we confirm the same. Accordingly, all grounds of appeal of the Revenue are dismissed." 8. Thus, the Tribunal concurred with the finding recorded by the CIT (A) that the assessee firm had not charged any interest and remuneration in accordance with the partnership deed and, in such circumstances, the assessee firm cannot be compelled to charge interest or remuneration, more particularly, when the partnership deed does not prescribe for the same. The Tribunal concurred with the finding recorded by the CIT (A) that the disallowance made by the AO on account of non provision of interest and remuneration could not have been disallowed under Section 10AA(9) of the....