2026 (3) TMI 1173

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....(1)(2), Mumbai, u/s. 143(3) of the Income-tax Act (hereinafter referred to as the "Act"), dated 04.03.2016 for Assessment Year 2013-14. 2. Grounds taken by assessee are reproduced as under: 1. The learned National Faceless Appeal Centre (NFAC) erred in confirming order of Assessing Officer disallowing partner's remuneration of Rs. 31,30,490/- paid to working partner out of remuneration of Rs. 99,76,470/- paid to him without appreciating that said remuneration was paid in accordance with the provisions of section 40(b)(v) of Income tax act 1961 and hence the disallowance of remuneration of Rs. 31,30,490/- may be deleted. 2. The learned NFAC erred in confirming order of Assessing officer taxing commission income of Rs....

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....ssment, Ld. Assessing Officer noted from the partnership deeds furnished by the assessee that the erstwhile computation mechanism prescribed u/s.40(b) with the lower levels of limits were considered in the deed, i.e., to (a) On the first Rs. 75,000/- of the book profit, or in case of loss Rs. 50,000/- or at the rate of 90% of the book profit, whichever is more (b) on the next Rs. 75,000/- of the book profit At the rate of 60% (c) on the balance of book profit At the rate of 40% 3.3. However, these limits were inadvertently taken note in the partnership deed. The correct limits for computation of allowability of partners remuneration, which the assessee adopted for its computation is as under: a) On the first Rs. 3,00....

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....ubted the fact that remuneration is paid to the working partner nor doubted the fact that remuneration is not authorised by the partnership deed. The issue pertains to quantification of the remuneration paid to the working partner. Section 40(b) talks about remuneration being authorised by the partnership deed and payable to the working partner. Quantum of remuneration is to be decided by the firm and if such remuneration is paid by the firm to the partner is in excess of limits specified in section 40(b), the same needs to be disallowed. Section uses the term "authorise" and not the term "quantify". It is not a case that the provisions contained in section 40(b) are ambiguous, therefore capable of more than one interpretation. It is a case....