Partner remuneration from a firm is not salary income, so standard deduction under the salary provisions is unavailable.

Salary paid by a firm to a partner is treated under section 67(1)(b) as part of the partner's share in the firm's income, because the firm cannot create a contract of employment with its own partner. The receipt therefore retains the character of business income of the firm and is not assessable under the head "Salaries" under section 14. As a result, the standard deduction under section 16(i) is unavailable in respect of that payment, and the disallowance of the deduction is upheld.

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Issues: Whether salary received by a partner from a firm is assessable under the head "Salaries" so as to entitle the partner to standard deduction under section 16(i) of the Income-tax Act, 1961.

Analysis: Salary paid to a partner by the firm is to be treated, under section 67(1)(b) of the Income-tax Act, 1961, as part of the partner's share in the income of the firm. A firm is not a separate legal person for the purpose of a contract of employment with one of its partners, and the amount paid as salary to a partner retains the character of business income of the firm rather than independent salary income assessable under section 14 of the Act. Since the receipt cannot be brought to tax under the head "Salaries", the statutory standard deduction applicable to salary income is unavailable.

Conclusion: Standard deduction under section 16(i) was not admissible on the salary received by the partner from the firm, and the disallowance was upheld.

Ratio Decidendi: Remuneration paid by a firm to its partner, when treated as part of the partner's share in the firm's income, is not taxable as salary income and therefore does not attract standard deduction under the salary provisions.

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