2005 (2) TMI 85

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....ng question of law under section 256(2) of the Income-tax Act, 1961, for opinion to this court: "Whether remuneration paid as business adviser to a partner of the firm is covered under the provisions of section 40(b) or not?" Briefly stated the facts giving rise to the present reference are as under: The reference relates to the assessment year 1984-85. The respondent-assessee is a regist....

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.... the assessee. The assessee was required to bear all the expenses including, director's remuneration payable by the company; (iii) The assessee would not dismiss any employees of the company and new employees could be appointed on recommendation by the assessee; (iv) The assessee shall pay a sum of Rs. 60,000 per year on which the assessee-company shall pay its own income-tax." For the as....

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....ion 40(b) of the Act and disallowed the claim of the respondent-assessee which order was confirmed in appeal by the Commissioner of Income-tax (Appeals). Feeling aggrieved the respondent-assessee preferred an appeal before the Tribunal. The Tribunal has allowed the appeal and has held that no disallowance was called for, because the remuneration paid was under an agreement with the company and not....

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....ent to the business adviser who was one of its partners clearly attracted the provisions of section 40(b) of the Act. Having heard learned counsel, we find that under the terms of the agreement reproduced above the respondent-assessee had taken on lease the entire business of the company. It was under an obligation to pay the salary of all the employees including the directors' remuneration and....