Tribunal allows appeal for partner's salary, emphasizing consistency and partnership deed entitlement.

The Tribunal allowed the appeal of the assessee, directing the AO to allow the claimed amount of Rs. 2.50 Lakhs for salary/remuneration to one of the partners. The decision was based on the amended supplementary deed of partnership executed in 1996, which outlined the entitlement of partners to remuneration. The Tribunal emphasized the principle of consistency, noting that the firm had consistently claimed and received remuneration for the partner since 1996.

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Issues:
Disallowance of salary and remuneration paid to a partner.

Analysis:

1. The appeal was filed by the assessee against the order of the Ld. CIT(A) for the assessment year 2014-15, specifically challenging the disallowance of salary and remuneration paid to one of the partners, Smt. Sharmila Dugar, amounting to Rs. 2.50 Lakhs. The AO noted that the assessee firm had declared total income of Rs. 4,52,370 and claimed salary and remuneration of Rs. 2.50 Lakhs to each of the two partners, totaling Rs. 5 Lakhs. The AO examined the partnership deed and supplementary deed to assess the validity of the claim.

2. The original partnership deed dated 01.07.1985 and the supplementary deed dated 10.05.1996 were crucial in this case. The supplementary deed amended clauses 4 and 10 of the original deed, authorizing the payment of interest and salary/remuneration in compliance with Section 40(b) of the Income Tax Act, 1961. The disagreement arose due to clause 8 of the original partnership deed, which raised concerns about the involvement of Smt. Sharmila Dugar in the day-to-day management of the firm.

3. The Ld. CIT(A) confirmed the AO's decision to disallow the claim, leading the assessee to appeal further. During the hearing, it was emphasized that the supplementary deed of partnership, executed in 1996, clearly outlined the entitlement of partners to remuneration, including Smt. Sharmila Dugar. The Tribunal found that the authorities erred in disallowing the claim based on clause 8 of the old partnership deed, which did not conflict with the provisions of the amended clause 10.

4. The Tribunal highlighted the principle of consistency, noting that the firm had consistently claimed and not faced disallowance for Smt. Sharmila Dugar's remuneration since the execution of the supplementary deed in 1996. Therefore, the Tribunal directed the AO to allow the claimed amount of Rs. 2.50 Lakhs for salary/remuneration to Smt. Sharmila Dugar for the relevant assessment year.

5. Ultimately, the Tribunal allowed the appeal of the assessee, emphasizing the validity of the claim based on the amended supplementary deed and the principle of consistency. The order was pronounced on 20th January 2021, in favor of the assessee.

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