2007 (6) TMI 195

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...., in view of the specific terms of the partnership deed in case of the partnership firm the deduction u/s 80HH of the Income Tax Act, 1961 is to be allowed on Gross Total Income before deducting the interest and remuneration to partner forming part of the business income being share income?" 3. The assessment year involved herein are 1997-98 and 1994-95 respectively. 4. For the sake of convenience we set out the facts in Appeal No. 17 of 2002 relating to assessment year 1997-98. 5. The assessee is engaged in the manufacture and sale of snuff. 6. In the assessment year in question the assessee claimed deduction under Section 80HH of the Act on the Gross Total Income without reducing therefrom the interest and salary paid to the partners ....

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....ssessee is no longer res-integra and is covered by several decisions of this Court including the decision in the case of Indian Rayon Corporation Ltd. vs. C.I.T. reported in [2003] 261 I.T.R. 98. 10. It is pertinent to note that prior to the assessment year 1993-94 the distribution of profits of the firm to the partners in the form of interest and remuneration was not allowable as business expenditure in view of the specific provision contained in Section 40(b) of the Act. However, by the Finance Act, 1992 w.e.f. 01/4/1993, Section 40(b) has been amended so as to allow deduction of such expenditure as more specifically set out therein.  Therefore, in the assessment year in question payment of interest and salary to the partners was de....