TaxTMI 
TaxTMI 
2004 (9) TMI 575
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....ved in the ground of appeals of the revenue are identical. The identical ground of appeals taken by the revenue reads as under : "The assessee firm claimed salary paid to the working partners, as the same is not allowable as per Circular No. 739 dated 25-3-1996 issued by the CBDT, New Delhi. Neither the salary has been quantified nor any method laid down to calculate the amount of salary to the partners as per clause 6 of the partnership deed and the Ld. Commissioner of Income-tax (Appeals) allowed the claim in favour of the assessee." 2. The relevant and material facts for the disposal of the issue involved in the ground of appeals of the revenue are that the assessee claimed deduction as per section 40(b)( v) of the Act for the sala....
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....e, the disallowance made by the Assessing Officer is liable to be deleted. 2.2 The Commissioner of Income-tax (Appeals) after considering these submissions of the assessee, deleted the impugned disallowance made by the Assessing Officer by making following observations in his order : "The appellant firm had paid remuneration at the rate of Rs. 2,500 per month each to both the working partners which is quite evident from the extract of ledger account pages 46, 47 for the assessment year 1998-99 and page 45 for the assessment year 1999-2000 available on assessment records. The Assessing Officer has not doubted that the payment is not made to the working partner and is not authorized by the instrument of partnership. He denied the deduct....
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....that the Assessing Officer was not justified in disallowing the remuneration paid to the partners. Accordingly the addition by way of disallowing of remuneration to working partners at Rs. 60,000 is not sustainable and deleted for both the assessment years." 2.3 Before us, ld. DR for the revenue placed strong reliance on the reasoning given in the order of the Assessing Officer and submitted that in the instant case, in clause 6 of the partnership deed, neither the amount of remuneration to be paid to the working partners of the assessee is specified nor the specific method of quantification has been laid down which should be specific proportion of the book profit and so, the salaries paid to each of the working partners is not in accord....
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....the business of the firm diligently and honestly and each of them will be paid a monthly salary as per the income-tax provisions and which can be revised from time to time in the best interest of the partnership." From this partnership deed, it is clear that as per clause 6, the salaries payable to each of the working partners, has not been specified which further means that this clause has neither specified the amount of salaries required to be paid to the each of the working partners nor has laid down the specific method of quantification which should have a specific proportion of the book profit, as laid down in section 40(b)( v)(i)/( ii) of the Act. Thus, the salaries paid to each of the working partners at the rate of Rs. 2,500 per ....