Case Law Details
ACIT Vs M/s. Balakrishna & Co. & Vice-Versa (ITAT Ranchi)
Salary and interest, which is given to the partners in terms of the partnership deed, the tax liability of the said amount shifts upon the partners and cannot be taken as tax liability of the firm. The applicability of section 28(v) cannot be excluded in the matter of best judgement assessment in respect of an assessee firm. It was the specific case of the assessee that the partners were working partners and they were entitled to salary and interest, as per terms of the deed in accordance with section 40(b).
Since as per section 28(v) tax liability of salary and interest paid to the partners in terms of partnership deed, shifts upon the partners and cannot be taken as tax liability of the firm; therefore the applicability of section 28(v) could not be excluded even in when best judgment assessment is made. Further, the partners were working partners and were entitled to salary and interest, as per terms of the deed in accordance with section 40(b), therefore the same should have been allowed while estimating the profit.
FULL TEXT OF THE ITAT JUDGMENT
The above said two appeals by the revenue and the assessee are directed against the order both dated 11.03.2014 passed by the Ld. CIT(Appeals) Jamshedpur for A.Y. 2 007-08.
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