Partner remuneration paid by a firm remains non-deductible despite government directions and separate taxation in partners' hands.

Remuneration paid by a firm to partners is not deductible in computing the firm's profits where the statutory bar applies under section 10(4)(b) of the Indian Income-tax Act, 1922. The prohibition covers salary, commission, interest, or other remuneration paid by a firm to any partner, and it is not displaced by the fact that the partner may have been assessed separately on the receipt. Payment under government directions does not change the character of the amount as remuneration paid by the firm to partners, so the allowance remains disallowed in the firm's assessment.

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Issues: Whether remuneration paid by an unregistered firm to partners who were also members of a government-appointed management board was deductible in computing the firm's profits, in view of the statutory bar against allowance of salary, commission or remuneration paid by a firm to a partner.

Analysis: Section 10(4)(b) of the Indian Income-tax Act, 1922 expressly prohibits any allowance in respect of payment by way of interest, salary, commission or remuneration made by a firm to any partner. The scheme of the Act does not permit the firm's profits to be reduced by such payments, even if the recipient partner may have been taxed on the corresponding receipt in his individual assessment. The circumstance that the remuneration was fixed or paid under government directions did not alter the character of the payment as one made by the firm to its partners. The statutory prohibition operated notwithstanding any supposed equitable considerations arising from the manner of taxation in the hands of the recipient partner.

Conclusion: The amounts paid as remuneration were not admissible deductions in the firm's assessments, and the questions referred were answered against the assessee and in favour of the Revenue.

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