Partner remuneration paid by a firm remains non-deductible, even where the partner joined as karta of an HUF.

Salary, commission or other remuneration paid by a firm to a partner is not deductible under the Income-tax Act, 1922, because the statutory bar applies to payments made to any partner. A Hindu undivided family cannot itself be a partner; when a karta enters the firm on behalf of the family, the firm still treats the karta alone as the partner. Any internal arrangement between the karta and the family does not change the character of the payment in the firm's hands. Such salary remains partner remuneration and is disallowed as revenue expenditure.

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Issues: Whether salary paid by a firm to partners who joined in a representative capacity as kartas of their Hindu undivided families was allowable as a deduction in computing the firm's income.

Analysis: The prohibition in section 10(4)(b) of the Income-tax Act, 1922 barred allowance of expenditure by way of salary paid by a firm to any partner. A Hindu undivided family cannot itself be a partner; where the karta enters the firm on behalf of the family, the firm recognises only the karta as the partner. Any internal arrangement between the karta and the family does not alter the firm's legal position or avoid the statutory bar. The allowance of salary to such a partner remains remuneration paid to a partner and is not deductible as business expenditure in the hands of the firm.

Conclusion: The salary payments were not allowable as revenue expenditure and were rightly disallowed; the question was answered in the affirmative, against the assessee.

Ratio Decidendi: A payment by a firm of salary, commission or remuneration to a partner is hit by the statutory prohibition notwithstanding that the partner may have joined the firm as karta of a Hindu undivided family.

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