2009 (3) TMI 224

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....h is engaged in the business of manufacture and export/sale of brass art ware. A return of income for the year under consideration was filed by it on31st Oct., 2005declaring a total income of Rs. 57,68,627. In the said return, deduction of Rs. 39,31,965 was claimed by the assessee firm on account of remuneration paid to its partners. During the course of assessment proceedings, it was noticed by the AO that the salary paid by the assessee firm to all other employees is only Rs. 4,86,918. He also noticed that the partnership deed of the firm does not specify the function and responsibilities of the working partners so as to justify the remuneration of Rs. 13,10,655 paid to each of the three partners. He also noted that as per the relevant cl....

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.... working partners as per the relevant clause of the partnership deed was within the ceiling prescribed in s. 40(b) and the AO having not made out a case that the quantum of such remuneration was in excess of the said ceiling, the disallowance made by him on this issue was not sustainable. He, therefore, deleted the disallowance made by the AO out of remuneration paid by the assessee firm to its partners. Aggrieved by this relief allowed by the learned CIT(A) to the assessee, the Revenue has preferred this appeal before the Tribunal. 4. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that all the three partners to whom the impugned remuneration was paid were its working partners....