1987 (8) TMI 62

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....at the instance of the assessee to answer the following question of law : " 1. Whether the Tribunal is correct in holding that the payment of Rs. 7,200, to two of the four partners of the firm, in view of clause 5 of the partnership deed of the firm, was the application of the profit of the firm after it had accrued or was earned ? 2. Whether, on the facts and in the circumstances of the cas....

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....clauses in the partnership deed mentioned that these two partners, Sobhagmal and Hiralal, who stay at Ahmedabad and Jaipur, respectively, and were carrying on the business of the partnership were to be paid Rs. 300 p.m. to meet their additional expenses of living in these metropolitan cities by way of city allowance. It was also stated therein that this city allowance to be paid to these two partn....

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....te Assistant Commissioner was, however, allowed accepting the assessee's contention. The Tribunal thereafter set aside the appellate order and restored that of the Income-tax Officer. The Tribunal held that this city compensatory allowance to two of the partners of the firm was not an expenditure incurred for the purpose of carrying on the business of the firm, but it was application of the firm's....

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.... of any payment of interest, salary, bonus, commission or remuneration made by the firm to any partner of the firm. The question, therefore, is whether these payments fall within the ambit of this prohibition. It is beyond controversy that these amounts were payments made to the two partners by the firm.The only surviving question, therefore, is whether the payments fall within the meaning of the ....