2026 (6) TMI 1121

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.... 2. The brief facts of the case are that the assessee had filed its return of income for A.Y. 2012-13 on 29.09.2012 at Nil income after claiming deduction of Rs. 16,82,06,879/- u/s. 10AA of the Income Tax Act. The original assessment was completed u/s. 143(3) of the Act on 25.03.2015 at Nil income. Thereafter, the case of the assessee was reopened u/s. 147 of the Act, on the basis of information received from ADIT(Investigation)-2, Surat regarding excess deduction claimed u/s. 10AA of the Act, due to difference in the figure of imports as mentioned in the audit report and as per data available with DGCIS Kolkata. Accordingly, a notice u/s. 148 of the Act was issued on 31.03.2019. In the course of reassessment, the AO was satisfied with t....

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....lusive arrangement within the meaning of section 10AA(9) r.w.s 801A(10) of the Act. 3. On the facts and circumstances of the case and law, the Ld.CIT(A) has erred in allowing the claim ignoring the judicial pronouncement by the Hon'ble Supreme Court in the case of McDowell Vs CTO wherein it was held that "Colourable devises cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious method. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges". 4. On the basis of the facts and circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the Assessing Off....

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....on for interest and remuneration payable to the partners. 6. On behalf of the assessee no one was present. 7. We have carefully gone through the order of the Assessing Officer as well as that of the Ld. CIT(A). On merits the findings of the Ld. CIT(A) is found to be as under: "5.3.8 It is seen that the moot issue was inflating business profit, which is otherwise exempt or is entitled to deduction, by not charging partners' remuneration and/or interest on capital. The Hon'ble High Court has held that on interpretation of the partnership agreement and considering the wish of the partners reflected in the partnership deed, not to pay /charge interest on the partners capital and the remuneration, such disallowance was not....

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....artners as per the original partnership deed, the resultant business profit was eligible for deduction u/s. 10AA of the Act and this fact has not been controverted by the Revenue. Further, as admitted by the Revenue, the deduction for interest and remuneration payable to the partners as per partnership deed, was an admissible deduction. Therefore, the factum of debiting the interest and remuneration payable to the partners to the P&L account or otherwise, has no impact on the ultimate total income of the assessee as per the provisions of the Act. The interest and remuneration payable to the partners as well as the resultant profit, both were eligible for deduction. We, therefore, do not find anything wrong with the order of the Ld. CIT(A) o....