The Tax Publishers2020 TaxPub(DT) 4611 (Pune-Trib)

INCOME TAX ACT, 1961

Section 40(b)

Income declared in the survey carried out under section 133A will be considered as 'Business income' covered under Chapter IV-D forming part of book-profit for the purposes of allowing remuneration to partners as the source of the income is business and the destination of such income is again in the nature of business assets, that is, stock, cash and receivables.

Business disallowance under section 40(b) - Remuneration to partners - Income declared in survey -

Assessee worked out the amount of partners' remuneration by including income declared in the survey which was also offered for taxation amount. Against this, AO held that such surrendered amount was separately taxable under section 69/69A and hence did not allow deduction on account of salary to the partners on such surrendered amounts by holding it to be outside the purview of 'book profit'. Held: Both the source and destination are business, inasmuch as the source of the income is business and the destination of such income is again in the nature of business assets, that is, stock, cash and receivables. Thus, such an income will be considered as 'Business income' covered under Chapter IV-D forming part of book-profit for the purposes of allowing remuneration to partners.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13



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