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Claim for higher partners' remuneration under section 40(b) based on revised return of income. Analysis: The appeal was filed by the assessee, a partnership firm engaged in trading, against the order of the Commissioner of Income-tax (Appeals) regarding the claim for higher partners' remuneration under section 40(b) of the Income-tax Act, 1961. The original return filed by the assessee contained a mistake related to incentives and discounts, which was rectified during the assessment proceedings. The assessee revised its profit and loss account and filed a revised return of income, increasing the taxable income and claiming a higher amount of remuneration for partners. However, the Assessing Officer rejected the claim, stating that the revised return was not filed voluntarily. The Commissioner of Income-tax (Appeals) upheld this decision, stating that the remuneration claimed by a partnership firm should be based on the amount debited in its books of account. The Tribunal heard arguments from both parties and considered that the revised return was filed based on the corrected profit and loss account, reflecting the actual income of the firm. The Tribunal emphasized that partners are entitled to the maximum remuneration permissible by law, especially when the assessed income is higher than the returned income. The Tribunal highlighted that the disparity in remuneration was due to the initial mistake in the profit and loss account, not the fault of the assessee, and directed the assessing authority to allow the higher partners' remuneration as per the revised return and assessed income. The Tribunal also instructed the assessing authority to permit the assessee to adjust entries in its books of account accordingly. In conclusion, the Tribunal allowed the appeal filed by the assessee, directing the assessing authority to grant the partners' remuneration under section 40(b) to the maximum extent permissible based on the revised return and assessed income. The decision emphasized the entitlement of partners to proportionate higher remuneration when the income assessed is greater than the returned income. The Tribunal highlighted the necessity for adjusting entries in the books of account to align with the revised income, ensuring fair treatment for the assessee.
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