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)