Partner's interest on capital and salary
whether compulsory if mentioned in the deed - Section 10AA exemption thereto
Facts:
Assessee partnership firm in the business of
Tobacoo Gutka products had a clause in their partnership deed for salary
and interest on capital. They were eligible for claiming section 10AA benefit
as well. They filed a NIL return claiming section 10AA benefit. AO forced the
interest on capital and salary as per section 40B the same was mentioned in the
deed. On appeal assessee pleaded that there was a revised supplementary deed
where the interest and salary clause was omitted. This did not meet the eyes of
the AO/CIT(A) who reduced the section 10AA exemption and forced the interest
and salary to partners. Aggrieved assessee went in higher appeal -
Held in favour of the assessee that there was no forced
compulsion to charge salary and interest just because it is mentioned in the
deed of partnership and the same is optional.
Applied:
PCIT v. Alidhra Taxspin Engineers and another in [Tax appeal
No. 265 of 2017, dt. 02-05-2017]
ACIT v. Mukta Enterprise (2018)
100 taxmann.com 44 (Surat-Trib) : 2018 TaxPub(DT) 7890 (Sur-Trib)
ACIT v. Kiran Jewellery [ITA No. 192 and 193/Srt/2017,
dt. 6-6-2019] : 2019 TaxPub(DT) 6183 (Sur-Trib)
PCIT v. Ruta Jewels in [Tax Appeal No. 165 of 2019, dt.
24-06-2019] : 2019 TaxPub(DT) 4730 (Guj-HC)
Al Reza Food v. ITO [ITA No. 663/Ahd/2014, dt. 23-03-2017]
Sagar Foods Mahuva v. ITO [ITA No. 750/Ahd/2014, dt. 22-02-2017]
Chandigarh Tribunal in ITO v. M/s Shivam Industries [ITA
No. 510/Ahd/2012 and 616/Chd/2012]
Case: Dinesh India
Co. v. ACIT 2023 TaxPub(DT) 6824 (Srt-Trib)