Consultancy Fees to doctors from firm - treatment

[Raghavendar]

Dear Experts,

A partnership firm (all the partners are doctors) runs a hospital, and paid consultancy fee to partners for their services in the hospital; this consultancy fee is paid apart from allowable remuneration under the income tax act. Is this allowed in the income tax act?

Please refer to any case law, if possible.

Thanks in advance

AI Summary

Doctors' Partnership Firm Faces Tax Inquiry Over Consultancy Fees; Section 40(b) Compliance Questioned A partnership firm composed of doctors operates a hospital and pays consultancy fees to its partners for their services, in addition to the allowable remuneration under the Income Tax Act. An inquiry was made regarding the legality of these payments under tax law. One expert confirmed that consultancy fees and remuneration are allowable, while another suggested that both are subject to limits under Section 40(b) of the Income Tax Act, referencing a court case. The case highlighted that partners cannot avoid statutory prohibitions by labeling themselves as experts, and any expertise should be contributed as part of their partnership role.