Partners' remuneration treatment fell outside the firm's assessment, so the referred tax question was not answered.

The referred question on excluding partners' remuneration from allocation of the firm's income did not arise in the assessment of the assessee-firm. The controversy concerned the treatment of salary paid to some partners in the hands of the partners or the karta of a Hindu undivided family, not the firm's own assessment. Any issue about disallowance under section 40(b) of the Income-tax Act, 1961, or the manner of assessment in the partners' hands was outside the scope of the question referred. The Court therefore declined to answer the reference as framed.

---

---

Issues: Whether the referred question regarding exclusion of remuneration paid to partners from the allocation of the firm's income in the hands of the partners arose for decision in the assessment of the assessee-firm.

Analysis: The dispute before the lower authorities concerned a firm's payment of salary to some partners. The contention accepted below related to the treatment of such remuneration in the hands of the partners or the Hindu undivided family status of the karta, not to the firm's own assessment. The Court held that any controversy about disallowance under section 40(b) of the Income-tax Act, 1961, or about the manner in which the amount should be assessed in the hands of the partners or the Hindu undivided family, was not the question referred and was not relevant to the assessment of the firm.

Conclusion: The question referred did not arise in the assessment of the assessee-firm, and the Court declined to answer it.

---