Partner remuneration under section 40(b) turns on capacity of payment, requiring factual clarification before application.

Section 40(b) of the Income-tax Act applies only where remuneration is paid to a partner in his capacity as a partner. The existing statement of the case did not conclusively establish whether the salary was paid to the recipient as a partner or in a different capacity, such as an agent of the colliery owners. Because that factual distinction was material to the application of the provision and the earlier binding principle, further factual clarification was required. A supplementary statement of the case was therefore called for on the recipient's capacity.

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Issues: Whether a supplementary statement of the case should be called for to determine whether the salary paid to a partner was paid in his capacity as a partner or in a different capacity.

Analysis: The referred question turned on whether section 40(b) of the Income-tax Act, 1961 applied only when the payment was made to a partner in his capacity as a partner. The existing statement of the case did not conclusively settle the capacity in which the salary was paid. In view of the earlier binding decision on the same principle and the subsequent Full Bench affirmation, further factual clarification was necessary on whether the recipient was paid as partner or as agent of the colliery owners.

Conclusion: A supplementary statement of the case was required on the point of the recipient's capacity.

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