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Issues:
Appeal against disallowance of salary paid to working partners under section 40(b)(v) of the Income Tax Act based on partnership deed lacking specific quantification and method for remuneration calculation. Analysis: The appeals arose from a single order of the Commissioner of Income-tax (Appeals) for assessment years 1998-99 and 1999-2000. The revenue challenged the deduction claimed by the assessee for salary paid to working partners, arguing that the partnership deed did not specify the amount of remuneration or the method of quantification as required by section 40(b)(v) of the Act and Circular No. 739 dated 25-3-1996 issued by the CBDT. The assessee contended that the salaries paid to working partners were debited monthly, in compliance with the partnership deed and section 40(b)(v) of the Act. The Commissioner of Income-tax (Appeals) allowed the deduction, noting that the remuneration was authorized by the partnership deed and the partners were working partners entitled to salary, contrary to the Assessing Officer's disallowance based solely on the lack of specific quantification in the partnership deed. The revenue argued that the salaries were not in accordance with the Act and the Circular due to the absence of specific quantification and method in the partnership deed. However, the assessee relied on the Commissioner's order and previous Tribunal decisions to support the deduction claim. The Tribunal found that the partnership deed did not specify the salaries to be paid to working partners or the method of quantification, rendering the salaries paid at a fixed rate not compliant with section 40(b)(v) and Circular No. 739. Citing previous decisions, the Tribunal upheld the revenue's appeal, setting aside the Commissioner's order and confirming the Assessing Officer's disallowance of the claimed salaries. In conclusion, both appeals filed by the revenue were allowed, affirming the disallowance of the salaries paid to working partners for the assessment years in question.
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