TaxTMI 
TaxTMI 
2013 (11) TMI 1064
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.... the disallowance in the hands of the firm under section 40(b) of salary/ remuneration to partners. CIT(A) citing the case of Durga Dass Devki Nandan vs. ITO, Palampur reported in (2011) 200 Taxman 318 and his order on the issue is perverse in view of the fact that the matter is squarely covered by the jurisdictional High Court viz. the Hon'ble Delhi High Court in its decision in ITA no. 1154 of 2011 in the case of M/s Sood Brij & Associates vs. CIT, XIII, New Delhi, decision dated 04-11-2011 in the favour of Revenue. 2. Whether in the facts and circumstances of the case, the CIT(A) has erred in deleting the disallowance in the hands of the firm under section 40(b) of salary/ remuneration to partners on the ground that he salary to partn....
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....o revenue's grounds, the assessing officer disallowed the salary/ remuneration paid by the assessee partnership firm to its partners u/s 40(b)(v) on the ground that the partnership deed does not clearly specify the scale of remuneration payable to partners. 3.1. Aggrieved, assessee preferred first appeal where it was pleaded that clause 6 of the partnership deed clearly provided the scale of remuneration payable by the assessee as under: "6. That all the parties shall be working partners and they shall be paid an annual remuneration in commensurate with their time devoted and services provided by them for carrying on business of the firm and they shall be allowed to withdraw such amounts during the year for their personal expenses, wh....
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....ct on the ground that the partnership deed does not specify the amount of the salary required to be paid to each of the working partners nor specify the method of quantification of salary to the working partners. According to the details filed by the AR of the appellant the maximum allowable salary to partners as per the provision of 40(b)(v)(1) of the Act is quantified as follows: Profit before remuneration 7318230 1. Rs. 50,000/- or 90% of the first 100000 of book profit, 90000 2. 60% of the next 100000 of the book profit. 60000 3. 40% of balance amount of book profit(7118230x0.4) Maximum allowable salary to partners 2847292 2997292 3.2. Against this, the appellant has claimed only Rs. 7,20,000/- as salary to pa....
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....pra) is not applicable to the facts of assessee's case inasmuch as it was a question of supplementary partnership deed dated 1-4-1992. The remuneration clause of the partnership deed as reproduced in the order of High Court is totally different than the assessee's partnership deed clauses in this behalf. In the case of Sood Brij & Associates (supra), the same are as under: "1. That subject to mutual consent of the partners, and subject to the provisions of the Income Tax Act, 961, the working partner or partners shall be paid such remuneration as may be mutually agreed between themselves, from time to time, and such remuneration shall be deductible expense before arriving a the share of the partners as allocable from the net profits. ....
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....tually agreed between themselves, from time to time". Thus, the High Court held the remuneration to be non specific in that case because same was left to the discretion of the partners. In contradistinction, in assessee's case the remuneration is clearly specified to be computed in the manner provided by Explanation 3 to Section 40(b) of the I.T. Act. The remuneration clause is further clarified in clauses 3,4,5 & 6 of the partnership deed. 5.3. The relevant clauses of remuneration in the case of Sood Brij & Associates (supra) and assessee being materially different, the Delhi High Court judgment is not applicable to assessee's case. 6. Apropos Revenue's ground no. 2 ld. DR relied o the order of assessing officer. 7. Ld. Counsel fo....
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....missions and gone through the material available on record. Apropos first two grounds of the revenue regarding the remuneration paid to the partners in accordance with the partnership deed, in our considered view the terms and conditions of the assessee's partnership deed are specific and cannot be termed as non-specific. Reliance placed by the revenue on the case of Sood Brij & Associates (supra) does not help the revenue's stand as in that case, as per the relevant terms and conditions of the partnership deed, the remuneration was to be paid as mutually agreed by the partners. There is significant difference in the language of terms and conditions partnership in both the cases which we have reproduced above. In view thereof, we see no inf....