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2008] 303 ITR 1 [2008] 174 TAXMAN 228 (PUNJ. & HAR.) HIGH COURT OF PUNJAB AND HARYANA Commissioner of Income-tax-II , Ludhiana v. Supreme Builders SATISH KUMAR MITTAL AND RAKESH KUMAR GARG, JJ. IT APPEAL NO. 552 OF 2007 MARCH 25, 2008â-  Section 145 of the Income-tax Act, 1961 - Method of accounting - System of accounting - Assessment year 2001-02 - Respondent-firm had filed its return showing certain income representing 10 per cent of its gross receipts after reducing interest and salary paid to its partners and depreciation - Assessment was framed under section 143(3) at higher income by rejecting its books of account and adopting 12 per cent of gross receipts as its income, after allowing depreciation, but not deductions on account of interest and salary paid to its partners holding that assessee had failed to prove factum of payment - On appeal, Commissioner (Appeals) held that since Assessing Officer had rejected its book results and had applied a rate of 12 per cent on its gross receipts, deductions on account of salary and interest paid to its partners were permissible to assessee on basis of terms and conditions of partnership deed - Tribunal upheld order of Commissioner (Appeals) - On instant appeal it was noticed that partnership deed was not disputed by revenue as per which remuneration of partners was to be credited in capital account of parties at end of financial year - Whether, even though assessee was maintaining its books of account under cash system of accounting, yet deductions on account of salary and interest to be paid to partners were allowable as per partnership deed - Held, yes - Whether, therefore, Tribunal had rightly upheld order of Commissioner (Appeals) - Held, yes Sanjeev Bansal for the Appellant. ORDER Rakesh Kumar Garg, J. - The revenue has filed the present Appeal under section 260A of the Income-tax Act, 1961 (for short 'the Act') against the order of the Income-tax Appellate Tribunal, Chandigarh Bench 'A', Chandigarh (for short 'ITAT'), dated 25-1-2007 passed in ITA No. 261/Chandi./2005 for the assessment year 2001-02 raising the following proposed substantial question of law :- "Is the Hon'ble ITAT, in the facts and…

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