2021 (1) TMI 835

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....see Firm had declared total income of Rs. 4,52,370/-. During the course of assessment proceedings, the AO noted that the assessee firm inter-alia has claimed salary and remuneration @ 2.50 Lakhs to each of the two partners (total 5 Lakhs). The AO called for the deed of partnership wherein the assessee brought to the notice of the AO that assessee firm was constituted on 01.07.1985 (original deed of partnership dated 01.07.1985 Refer PB 1-5) and thereafter made certain amendments by supplementary deed of partnership dated 10.05.1996 placed at Page 6-7 of the PB. Even though the AO acknowledges that the assessee has amended its partnership deed by executing the supplementary deed dated 10.05.1996 wherein it altered and amended clause 4 and 10....

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....lause 10 that both the partners have agreed to keep themselves actively engaged in conducting the affairs of the business of the partnership firm. The said partners shall be working partners. It is hereby agreed to that in consideration of the said partners keeping themselves actively engaged in the business of partnership firm and working as working partners, shall be entitled to remuneration. The remuneration payable to the said working partners shall be computed in the manner laid down or deduction under section 40(b)(v), read with Explanation 3 of the Income Tax Act, 1961 or any other applicable provision as may be in for the relevant accounting year. Such amount of remuneration shall be distributed between both the partners followin....