TaxTMI 
TaxTMI 
2011 (8) TMI 750
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....d and bad in law, as notice u/s.143(2) dtd. 29-9-2008 was served on 3-10-2008 i.e. after 30-09-2008, is barred by time. (b) The CIT(A) erred in not accepting the contention that order dtd. 29-12-2009, which is passed without considering submission filed on 29-12-2009, is invalid and bad, as it is violating principles of natural justice and void ab initio on facts of the case. (II) On merits : Disallowance of Salary to partner Rs.13,38,200 (a) The CIT(A) erred in confirming, disallowance of remuneration paid to partner Vikram N. Gandhi in his representative capacity of Vikram N Gandhi HUF. (b) The CIT(A) erred in not accepting the contention that in assessee's own case Hon'ble ITAT has allowed the con....
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....in the individual capacity and not in the representative capacity and hence, no disallowance can be made u/s.40(b). It was held by Hon'ble Gujarat High Court in that case that Tribunal was justified in law in holding that the remuneration in the form of salary paid to individual was to be disallowed. This decision is on this basis that even if a person joins the partnership in representative capacity, within the firm, the position of such partner is that of an individual only. It was submitted by Ld. AR of the assessee before us that at that point of time, salary to partner was not a allowable deduction and the same was to be disallowed as per the provisions of section 40(b) and hence, under similar facts, it was held by Hon'ble Gujarat Hig....
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....supra) is rendered by a bench of three judges, whereas the earlier decision of Hon'ble apex court rendered in the case of Rashik Lal & Co. (supra) is rendered by a division bench of Hon'ble apex court consisting of two judges and hence, this later judgment rendered in the case of Kanji Shivji & Co. (supra) should be followed. It was also submitted that as per Explnation-4 to Section 40(b), "working partner" means an individual who is actively engaged in conducting the affairs of the business or profession of the firm of which he is a partner. It was submitted that in the present case, salary paid to the partner is in his individual capacity but he is not partner of the firm in his individual capacity but as karta of HUF and hence, as per th....
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....commission to the HUF, which was a real partner. Hence the facts in the present case are similar and it was held by Hon'ble apex court in that case that a partner does not act in a representative capacity in the partnership and his functions are in his personal capacity like any other partner. On page No.469 of 229 ITR, it is observed by Hon'ble apex court that it is the individuals constituting the firm who are its partners. It is also observed that partner may be under obligation to hand over the money received by him to somebody else by virtue of a sub-contract or any other arrangement. That will not change the character of the payment by the firm to its partner or the status of the partner in the firm. The relevant portion of this judgm....
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....cause section 40(b) of the Act expressly prohibits such deduction. The basic principle that a firm is a compendious mode of describing the persons constituting the firm must not be overlooked. It is the individuals constituting the firm who are its partners. The partner may be under an obligation to hand over the monies received by him to somebody else by virtue of a sub-contract or any other arrangement. That will not change the character of the payment by the firm to its partner or the status of the partner in the firm. The firm is not entitled to get any deduction on account of payment of commission to a partner merely because the partner has an obligation to share the money with somebody else. So far as the firm was concerned, the comm....