2008 (3) TMI 222

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....aising the following proposed substantial question of law : "Is the hon'ble Income-tax Appellate Tribunal, in the facts and in the circumstances of the case legally correct in allowing interest and salary to partners when there is a clear finding of fact that books of account are maintained on cash basis and that no payments have been made to the partners ?" 2. The respondent is a firm and a civil contractor. Return for the Rs. 12,990. In the return, income was worked out by adopting 10 per cent. of the assessment year 2001-02 was filed on March 9, 2002, declaring an income of gross receipts of Rs. 78,57,707 as income and further reducing the interest paid to partners, salary to partners and depreciation, thereby arriving at the net t....

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....lary and interest to the partners, it was held that since the Assessing Officer had rejected the book results and applied a rate of 12 per cent. on gross receipts, deduction on account of salary and interest as permissible to the assessee on the basis of the terms and conditions of the partnership deed.    4. Aggrieved against the said order, the Revenue filed the appeal before the Income-tax Appellate Tribunal, Chandigarh questioning the deduction on account of salary and interest allowed to the partners of the assessee. The Revenue also contested the directions of the Commissioner of Income-tax (Appeals) to assess only 12 per cent. of profit in respect of difference as per the revised return receipts. The Tribunal vide i....