1994 (3) TMI 58

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....ered by T. N. C. RANGARAJAN J.--The basic facts relating to this reference application are that the assessee is a firm of four partners engaged in the business of "dealer in pulses and grains". For the previous year ended October 10, 1978, corresponding to the assessment year 1979-80, the firm had paid a salary of Rs. 18,500 to two partners in their individual capacity. Those two partners repre....

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.... 285. But learned counsel for the Revenue pleaded for reconsideration of that decision on the ground that the Supreme Court has held in CIT v. R. M. Chidambaram Pillai [1977] 106 ITR 292 that salary paid to the partner is nothing but a share of profit and that the Explanation added to section 40(b) recognising the representative capacity of a partner referred only to payment of interest and that c....

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....y was being added back to the profit of the firm. Recognising the hardship arising from such situation, Parliament has come out with the Explanation to section 40(b) recognising the representative capacity of a partner in the case of payment of interest. We do not think that there can be a partial recognition of such representative capacity. Once it is recognised that the real partner is the joint....

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....ws from the provisions of the Hindu Gains of Learning Act, Act 30 of 1930, under which the gains of learning must be held to be separate property of the individual and cannot be treated as part of the income of the joint family. Once the joint family is recognised as the real partner of the firm, the law has departed from the original position of recognising only the individual as a partner and, c....