AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 215
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....of the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 31/12/2015 relevant to Assessment Year (AY) 2013-14. 2. The grounds of appeal raised by the assessee are as under:- "(1) That on facts and in law, the learned CIT(A) has grievously erred in confirming the addition of Rs. 12,58,800/- made u/s.40(b) of the Act, by treating it as excessive remuneration paid to partners. (2) That on facts, evidence on record, and in law, the learned CIT(A) ought to have deleted the entire disallowance as prayed for." 3. The solitary issue raised by the assessee in this appeal is that the learned CIT(A) erred in confirming the order of AO by sustaining the disallowance of Rs. 12,58,800/- on account of remuneration pa....
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.... the assessment framed u/s 143(3) of the Act vide order dated 24-08-2015. 7. The assessee in support of his claim has also relied on the judgment of Hon'ble High Court of Himachal Pradesh, in the case of CIT vs. Anil Hardware Store reported in 323 ITR 368. 8. However, the AO referred the supplementary partnership deed made on 18-05-2006, which reads as under: "Remuneration to Partners:- Mr. Parag Dineshbhai Shah shall devote his full time and Ms. Rupali Tushar Kothori shall devote her time for the business of Partnership firm and in consideration, both partners are entitled to the amount of remuneration on the basis of "Book Profit" calculated as provided under section 40(b)(v)(2) of Income Tax Act read with explanat....
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....cific manner i.e. 90% of the Book Profit on the first Rs. 75,000/- of the Book Profit, 60% of the Book Profit on the next Rs. 75,000/- of the Book Profit and 40% of the Book Profit on the remaining amount. Thus, the assessee is entitled for the remuneration in the following manner: Book Profit 1,32,12,505 Rate First 75,000 67,500 90% Next 75,000 45,000 60% Balance 1,30,62,505 52,25,002 40% Remuneration 53,37,502 Thus, the AO worked out the allowable amount of remuneration for Rs. 53,37,502/- and disallowed the excess amount of Rs. 12,58,800/- (65,96,302-53,37,502) and added to the total income of the assessee. 9. Aggrieved, assessee preferred an....
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.... was distinctly provided that the book profit of the firm shall be calculated as per the provisions of Section 40(b) of the Act in force at the end of the accounting period. It is also contended that in the assessment order for A.Y. 2009-10 framed u/s.143(3) of the Act the remuneration was allowed. 3.5. The facts of the case and the submission are considered. The case of the appellant is that the remuneration paid to working partners and claimed by the assessee in the instant case was supported by the supplementary deed executed by the firm and was also within the limits prescribed u/s.40(b) of the Act. On the other hand the case of the AO is that the assessee has specified the amount of remuneration payable to the partners and it ....
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....ee payable to the partners. As per the AO, the assessee is entitled to determine the remuneration as per the clause of supplementary partnership deed dated 18-05-2006, which reads as under: "Remuneration to partners:- Mr. Parag Dineshbhai Shah shall devote his full time and Ms. Rupali Tushar Kothari shall devote her time for the business of Partnership firm and in consideration, both partners are entitled to the amount of remuneration on the basis of "Book Profit" calculated as provided under section 40(b)(v)(2) of Income Tax Act read with explanation -3 to Section 40(b)(v) of Income Tax Act., as under: On the first Rs. 75,000/- of the Book Profit At the rate of 90% of the Book Profit On the next Rs. 75,000/- of t....
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....guidance from the judgment of Hon'ble High Court of Himachal Pradesh in the case of CIT vs. Anil Hardware Store reported in 323 ITR 368 wherein it was held as under : "7. We are not in agreement with this submission. The Central Board of Direct Taxes circular referred to above lays down two conditions. Either the amount of remuneration payable should be specified or the manner of quantifying the remuneration should be specified. In the present case, the manner of fixing the remuneration of the partners has been specified. In a given year, the partners may decide to invest certain amounts of the profits into other venture and receive less remuneration than that which is permissible under the partnership deed, but there is nothing wh....