DCIT Vs Regent Corporation (ITAT Surat)
The appeal before the ITAT Surat arose from the Revenue’s challenge to the order of the Commissioner of Income Tax (Appeals) allowing Regent Corporation’s claim of deduction under Section 80IB for Assessment Year 2010-11. The assessee, a partnership firm engaged in the real estate business, had claimed deduction of ₹2,04,07,333 under Section 80IB while computing its income. The original assessment under Section 143(3) accepted the returned income. Subsequently, the assessment was reopened under Section 147 on the ground that the assessee had claimed deduction without providing for interest on partners’ capital and remuneration to partners as contemplated in the partnership deed. The Assessing Officer concluded that deduction under Section 80IB should be computed only after reducing such amounts and consequently restricted the deduction by disallowing ₹2,04,07,333.
During the reassessment proceedings, the assessee submitted that the original partnership deed merely provided an option regarding payment of remuneration to working partners and that the partners had consciously decided not to pay any remuneration. As regards interest on capital, the assessee relied upon a supplementary partnership deed dated 1 April 2008, executed in accordance with the partnership deed, under which partners agreed that their capital contributions would remain interest-free. The Assessing Officer rejected the supplementary deed on the ground that it had not been produced during the original assessment proceedings and maintained the disallowance.
