TaxTMI 
TaxTMI 
2023 (4) TMI 136
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....8,90,440/-. The assessee's case was selected for complete scrutiny and the assessment order dated 19.03.2021 was passed u/s. 143(3) r.w.s. 143(3A) and 143(3B) of the Act where the A.O. made additions/disallowances and determined the total income at Rs.2,69,18,161/-. 4. The assessee was in appeal before the ld. CIT(A) who confirmed the addition made by the A.O. 5. The assessee is in appeal before us, challenging the order of the ld. CIT(A). 6. Ground no. 1 raised by the assessee is on the addition u/s. 40(b)(ii) of the Act. It is observed that the assessee had paid a remuneration amount of Rs.2,70,60,662/- to both the partners of the assessee firm during the impugned year and had furnished the deed of partnership in support of its claim. The A.O. relied on clause 7 of the partnership deed and calculated the remuneration payable to the partners which according to the A.O. was not in accordance with the terms of deed of partnership dated 01.08.2005 and held that the same was in violation to the provision of section 40(b)(ii) of the Act. 7. During the assessment proceeding, the assessee in its submission has stated that the remuneration of the partnership was in accordance to the s....
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....y the assessee. The ld. CIT(A) further held that the assessee's contention that the excess claim over the years was allowed, was not to be considered for the fact that the res judicata is not applicable to the income proceedings, thereby confirming the addition made by the A.O. 9. The learned Authorized Representative (ld. AR for short) for the assessee contended that the lower authorities have failed to consider the submission of the assessee wherein the supplementary deed dated 16.03.2021 was produced during the pendency of the assessment proceedings and not an afterthought as alleged by the A.O./ld. CIT(A). The ld. AR further stated that the lower authorities have failed to consider the retrospective effect given to the supplementary deed, whereby the assessee firm was entitled to pay remuneration to its partner as per the amended provision of section 40(b)(v) of the Act. The ld. AR brought our attention to the supplementary deed filed at page no. 38 of the paper book and took us through the various clauses which facilitate for higher remuneration to the partners. The ld. AR also stated that the assessee's case for A.Y. 2014-15 was assessed u/s. 143(3) of the Act wherein the A.....
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.... 2009 which came into effect from 01.04.2010. The amended provision provide for higher remuneration pay out in case of partnership firms. It is an undisputed fact that the assessee would get the benefit of the amended provision for higher remuneration from 01.04.2010. The only lacuna in the assessee's claim is that the assessee has failed to execute the supplementary partnership deed immediately after the enactment of the amended provision. It is only on 16.03.2021 that the assessee has executed the supplementary deed of partnership where the modified remuneration payable to working partners was specified. Nevertheless the assessee vide its supplementary deed gave retrospective effect to the modified remuneration as on 01.04.2010, when the amended provision of section 40(b)(v) came into effect. This action of the assessee was not convincing to the A.O. as the lower authorities have alleged it to be a self serving document which was an afterthought subsequent to the issuance of the show cause notice. The moot question here is whether the assessee was entitled to modify remuneration as per the amended provision based on the supplementary deed giving effect retrospectively. For this p....
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.... should be calculated as per the partnership deed subject to the provisions of the Act where the said remuneration should not exceed the maximum amount provided under the Act. We would also like to place our reliance on the decision Hon'ble Allahabad High Court in the case of CIT vs. Great City Manufacturing Co. [2013] 33 taxmann.com 258 (All), wherein it was held that the A.O. has to see if the conditions of the partnership deed provided for remuneration to working partners and that the same is within the limit prescribed u/s. 40(b)(v) of the Act. The relevant extract of the said order is cited hereunder for ease of reference: 5. ........... The Parliament in its wisdom had fixed a limit on allowing the remuneration to the working partners and if the remuneration are within the ceiling limit provided then recourse to provision of Section 40A(2)(a) of the Act cannot be taken. The assessing officer is only required to see as to whether the partners are the working partners mentioned in the partnership deed, the terms and conditions of the partnership deed provide for payment of remuneration to the working partners and whether the remuneration provided is within the limits prescrib....