Partner remuneration and retainership payments accepted where the deed authorised them, the amounts were genuine, and recipient income was reported.

Partnership remuneration is allowable where the deed and addendum authorise revised partner salary within the statutory ceiling under section 40(b), and a later-accepted pattern of similar remuneration supports the claim. Retainership payments made for sales-related work during the festive season were also accepted as genuine because the recipients reported the sums as salary income, filed confirmations, and the Revenue did not displace the explanation that the payments were salary-like rather than professional fees. On these facts, the additions were deleted.

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Issues: (i) Whether disallowance of salary paid to partners was justified where the partnership deed and addendum authorised revised remuneration within the statutory ceiling. (ii) Whether retainership expenses paid to two persons were liable to disallowance for alleged non-deduction of tax and want of supporting agreement.

Issue (i): Whether disallowance of salary paid to partners was justified where the partnership deed and addendum authorised revised remuneration within the statutory ceiling.

Analysis: The original partnership deed permitted variation in partner remuneration from time to time, and the addendum stated that the enhanced remuneration would operate from 01.04.2011. The objection that the addendum was written on stamp papers purchased earlier was not accepted as a sufficient reason to disregard the document. The remuneration paid was also within the permissible limit under section 40(b) of the Income-tax Act, 1961, and the fact that similar remuneration had been accepted in subsequent years supported the assessee's claim.

Conclusion: The disallowance of partner salary was not sustainable and was deleted in favour of the assessee.

Issue (ii): Whether retainership expenses paid to two persons were liable to disallowance for alleged non-deduction of tax and want of supporting agreement.

Analysis: The amounts were shown to have been paid to persons engaged during the festive season for sales-related work, and the recipients had returned the sums as salary income in their income-tax returns. Their returns and confirmations were placed on record, and the genuineness of the payments was not displaced by the Revenue. In these circumstances, the assessee's explanation that the payments were in the nature of salary-like remuneration and not technical or professional fees was accepted.

Conclusion: The disallowance of retainership expenses was not sustainable and was deleted in favour of the assessee.

Final Conclusion: The appeal succeeded on the two substantive issues decided on merits, resulting in deletion of the impugned additions while the remaining grounds were not pressed.

Ratio Decidendi: Remuneration to partners is allowable when authorised by the partnership deed and within the statutory limit, and a payment to workers whose corresponding income has been included by the recipients cannot be disallowed merely for want of a formal label or an alleged TDS default when the transaction is otherwise found genuine.

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