TaxTMI 
TaxTMI 
2019 (2) TMI 897
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.... CIT(A) has erred in law by ignoring the order passed by the Hon'ble Commissioner of Income Tax (Appeals) in the appellant's own case in Assessment Year 2009-10 deleting the disallowance of remuneration paid to the partners of the firm. 4. The above grounds of appeals are independent and without prejudice to one another. 5. The appellant craves leave to add /withdraw or amend any ground of appeal at the time of hearing." 2. In the above grounds of appeal, the solitary issue involved is of disallowance of Rs. 45,00,000/- on account of remuneration paid to partners of the firm. 3. The briefly stated facts of the case are that the assessee is a law firm (partnership) and derived income under the head "profit and gains of business & profession" and "income from other sources". The Assessing Officer in the assessment completed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as the Act) on 29/03/2014 disallowed one of the amount as remuneration of Rs. 45,00,000/- paid to two partners namely Sh Rajiv K Luthra ( Rs. 30,00,000/-) and Sh. Mohit Saraf ( Rs. 15,00,000/-) on the ground that same has not been paid in accordance with the provisions of ....
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....ITR 321 (SC). The Ld. Counsel also submitted that ratio of the decision of the Hon'ble Delhi High Court in the case of Sood Brij and Associates (supra) is not applicable over the facts of the instant case because in the said case remuneration was payable to future mutual agreements. 6. The Ld. DR on the other hand relied on the order of the lower authorities. 7. We have heard the rival submissions and perused the relevant material on record. In the instant case, the partnership firm has paid remuneration of Rs. 45,00,000/- to two partners in the ratio of 2/3 : 1/3. The relevant clause of the partnership deed dated 31.3.1999 of the assessee firm is reproduced by the Ld. Assessing Officer in the assessment order. For ready reference said Clause is reproduced as under: "It is hereby agreed that all partners of the firm are working partners (RKL the Sr. Managing Partner) and would be required to perform such duties as are decided and allotted to them after due deliberation and discussions. The remuneration paid to all of the partners will be the amount of remuneration allowable under section 40(b)(v) of the Income Tax Act, 1961 to be shared amongst themselves in their pr....
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.... It has been represented that the A.Os are not allowing deduction on the basis of these and similar clauses in the course of scrutiny assessments for the reason that they neither specify the amount of remuneration to each individual nor lay down the manner of quantifying such remuneration. 2. The Board have considered the representations. Since, the amended provisions of section 40(b) have been introduced only with effect from the A.Y.1993-94 and these may not have been understood correctly the Board are of the view that a liberal approach may be taken for the initial years. It has been decided that for the A.Y. 1993-94 to 1996-97 deduction for remuneration to a working partner may be allowed on the basis of the clauses of the type mentioned at 1(i) above. 3. In case where neither the amount has been quantified nor even the limit of total remuneration has been specified but the same has been left to be determined by the partners at the end of the accounting period, in such cases payment of remuneration of the firm's income. 4. It is clarified that for the assessment year subsequent to the A.Y. 1996-97, no deduction u/s. 40(b)(v) will be admissibl....
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....ffairs of the partnership firm, as the circumstances and need of the firms business may require. The total remuneration payable to the working partners shall be an amount permissible as remuneration to the working partners under the Income Tax Act, 1961 and as applicable from time to time." [Paragraph 13 and 14] Ratio of the decision of the Himachal Pradesh High Court in CIT v. Anil Hardware Store [2010} 323 ITR 368, does not assist the stand and contention of the appellant. On examining the partnership deed, it was held that the two partners were entitled to 50% or equal amount as remuneration. The contention of the Revenue that the partnership deed did not exactly determine the remuneration payable to the partners, was rejected holding that the requirement of the section was that the partnership deed should specify the amount payable or that the manner of quantifying the remuneration should be specified. In the said case, the High Court held that the manner of fixing the remuneration was specified in the partnership deed. On reading the supplementary partnership deed, it is clear that the remuneration is not specified. The manner of quantifying the remu....