TaxTMI 
TaxTMI 
2025 (3) TMI 1903
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....n to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal." 3. Facts of the case, in brief, are that the assessee is a partnership firm filed its return of income on 30.09.2015 declaring total income of Rs. 1,38,960/-. The case was selected for scrutiny and notices u/s 143(2) and 142(1) were issued to the assessee. The assessee firm consists of four partners. The assessee has claimed depreciation of Rs. 32,76,330/- in computation of income, however, in the books of accounts the assessee has not debited the above depreciation. It was further observed by the Assessing Officer that the assessee firm has paid interest of Rs. 21,17,723/- to all its four partners on the credit balances standing in the books of accounts including the profit of the year. By not providing depreciation in the books higher net profit has been credited to partners capital account which has resulted into disclosure of higher value of assets & also resulted in higher payment of interest on capital. According to the AO by resorting to this practice, the assessee firm has artificially increased the credit balance of capital ....
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....disallowance of Rs. 1,13,286/- out of various expenses is unjustified. Ld. AR submitted before the Bench that the Assessing Officer erred in re-casting the capital accounts of the partners & thereby further erred in reducing the expenditure towards interest on partners' capital. It was contended that there is no error in not charging the depreciation in the books of accounts since the same was charged in the computation of income. It was further submitted by Ld. AR that the partners have already shown this interest income in their respective returns of income and therefore this will be double taxation if the same interest is disallowed and added back to the income of the assessee firm. 7. With regard to disallowance of interest paid to partners, it was alternatively submitted by Ld. AR that the Assessing Officer erred in deducting withdrawals by the partners from opening balance of capitals instead of on day to day basis. It was further submitted by Ld. AR that the partners have also contributed capital to the firms which was not considered by the Assessing Officer for the purpose of calculation of interest. Ld. AR submitted that the Assessing Officer further erred in deducting ....
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....of Section 40(b)(iv) of the Income Tax Act, not Section 40(b)(v). They argue that the payment of interest is authorized and in accordance with the terms of the partnership deed. There's a distinction made between interest paid to partners and remuneration paid to working partners, as per the provisions of Sections 40(b)(iv) and 40(b)(v) of the Income Tax Act. The argument of the appellant includes explanations of relevant sections of the Income Tax Act regarding the deduction of interest and salary payments to partners, along with explanations of terms such as "working partner" and "book profit." The assessee requests reconsideration of the disallowance of interest, presenting arguments and evidence to support their position. With various arguments and explanations regarding deductions, interest payments to partners, depreciation, and creditor confirmations. The deduction for interest payment to partners is governed by specific provisions in the Income Tax Act, but there's no restriction on deducting interest before working out depreciation. The AO (Assessing Officer) has the duty to ensure that the books of accounts reflect the true state of affairs, and interest payments ....
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....ssessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work in or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee. Explanation 2.-For the purposes of this clause "written down value of the block of assets" shall have the same meaning as in clause (c) of sub-section (6) of section 43. Explanation 3.-For the purposes of this sub-section, the expressions "assets" and "block of assets" shall mean- (a) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature. Explanation 4.-For the purposes of this sub-section, the expression "know-how" means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil-well ....