Amarjit Singh ORDER
Amarjit Singh, Member (A)
1. The appeal filed by the Revenue for A.Y. 2010-11, arise from order of the CIT(A)-5, Vadodara dated 08.09.2016, in proceedings under Section 143(3) r.w.s. 263 of the Income Tax Act, 1961; in short "the Act". The Revenue has raised following grounds of appeal:-
"1. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in deleting the disallowance made under section 40(a)(ia) of the Act, without appreciating the fact that the AO has rightly made such disallowance as the assessee has neither at the time of proceedings u/s. 263 of the Act not at the time of proceedings u/s. 143(3) r.w.s. 263 of the Act has produced any material evidences regarding its claim that TDS at specified rate was deducted from the running bills by the contractee with respect to the testing charges.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) erred in deleting the disallowance made on account of remuneration to partners, without appreciating the fact that the AO has rightly made such disallowance as the assessee in his profit and loss account has shown the interest income separately under the head indirect income.
3. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary."
2. The fact of the case is that assessment under Section 143(3) r.w.s. 263 of the Act was finalized on 28.12.2015 at Rs. 42,09,980/- after making disallowance under Section 40(a)(ia) of Rs. 12,03,690/- and disallowance under Section 40(b) of Rs. 10,18,000/-. The AO has made disallowance of Rs. 12,03,960/- on the ground that assessee has not made any TDS on payment of testing charges of Rs. 12,32,344/-. The assessee has made disallowance under Section 40(b) of Rs. 11,68,000/- on the ground that while calculating the allowable remuneration to the partners, the assessee has not excluded the income of Rs. 20,56,185/- earned on account of interest on fixed deposit.
3. The aggrieved assessee has filed appeal before the Ld. CIT(A) against the aforesaid disallowance made by the AO. The Ld. CIT(A) has allowed the appeal of the assessee on both the issue. In respect of addition of Rs. 12,32,344/- made under Section 40(a)(ia) of the Act the Ld. CIT(A) has given detail finding and held that assessee was not liable to deduct tax as the actual payment to the contractor for testing charges was made by the Government and the assessee had only reimbursed the expenses to the Government. Regarding disallowance of Rs. 10,18,000/- on account of partner's' remuneration under Section 40(b) of the Act on the ground that interest received on Fixed Deposit/SSNL Bonds was income from other sources, the Ld. CIT(A) after following the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. J.J. Industries MANU/GJ/0715/2013 : (2013) 35 taxmann.com 103 (Guj.) allowed the appeal of the assessee holding that interest income generated out of surplus fund invested in the Fixed Deposit was a part of the business income.
4. Heard both the parties, perused the ........