INCOME TAX ACT, 1961

Section 40(b)

Business disallowance - Under section 40(b) - Remuneration to partners - Treatment of income declared in survey

The assessee was a firm and engaged in the business of construction of housing project. A survey was conducted in the business premises of assessee under section 133A of the Act. The assessee offered additional income basing on some incriminating documents found during the said survey. Assessee offered additional income basing on some incriminating documents found during the survey. AO alleged that additional income offered during the course of survey should be excluded from the profit and loss account and was to be treated as undisclosed income under section 69. Further, the deduction claimed under section 40(b) on account of salary and interest paid to partners was disallowed. The assessee contended that the disclosed receipt of Rs. 72,73,369 were on account of difference of sales value of flats/unit sold and these receipts were part and parcel of the trading receipts. Held: The nature and source of said amount disclosed during the course of survey was established as business income and assessee did not have any other business activity, except business income from construction of housing project. Therefore, entire disclosed amount was attributable to the business activity and consequently was eligible for all allowances under section 40(b).

Relied :Rashtriya Leather Works in ITA No. 253/PN/2003 for assessment year 1999-2000 .

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14

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