9911796707
|
Home
Issues:
Interpretation of section 40(b) of the Income-tax Act, 1961 regarding the disallowance of commission paid to a partner in a firm. Analysis: The judgment by the High Court of Orissa involved the interpretation of section 40(b) of the Income-tax Act, 1961, specifically regarding the disallowance of commission paid by an assessee-firm to a partner. The Revenue contended that under section 40(b), any payment of interest, salary, bonus, commission, or remuneration made by the firm to any partner is not deductible while computing income. The case revolved around the payment of commission to a partner, Sri Rasiklal P. Rathor, in his individual capacity, while his Hindu undivided family was the partner in the firm. The Assessing Officer added the commission amounts to the taxable income of the firm under section 40(b. The assessee argued that the commission was paid to Sri Rasiklal P. Rathor in his individual capacity, distinct from his role as a partner representing his Hindu undivided family, thus claiming that section 40(b) did not apply. The court noted the differing views of High Courts on this matter, with some holding that the prohibition under section 40(b) applies regardless of the capacity in which the payment is made to a partner, while others took a contrary view. The court examined the legislative intent behind section 40(b) and the definitions of "person" and "individual" in the Act. It highlighted the distinction between an individual and a karta of a joint family in the context of a partnership firm, emphasizing that a karta of a Hindu undivided family acting in a representative capacity is not considered a partner for the purpose of section 40(b). The court ultimately ruled in favor of the assessee, holding that the disallowance of the commission payment was not justified under section 40(b. The judgment, delivered by Judges S. K. Mohanty and Arijit Pasayat, provided a detailed analysis of the legal provisions, precedents, and the specific circumstances of the case to arrive at the conclusion that the commission payment to the partner in his individual capacity was permissible and not subject to disallowance under section 40(b) of the Income-tax Act, 1961.
|
