9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (3) TMI 947 - AT - Income TaxDisallowance of remuneration to the partners on the ground that the partnership deed does not specify the quantification of remuneration to the partners - AO disallowed the salary to working partners which has been upheld by the Ld. CIT(A) - HELD THAT - In the instant case, the partnership deed does not specify the manner of computation of quantum of remuneration to partners and the same has been left undetermined, undecided and left to the discretion of partners, therefore, I do not find any infirmity in the order of the Ld. CIT(A) in confirming the addition made by the AO. In the instant case there is no clause at all regarding the methodology and the manner of computing the remuneration of partners. Therefore, this decision also is of no help to the assessee . In this view of the matter and respectfully following the decision of Hon ble Jurisdictional High Court in the case of Sood Brij Associates vs CIT 2011 (11) TMI 3 - DELHI HIGH COURT relied on by the AO, thus find no infirmity in the order of the Ld. CIT(A) in confirming the disallowance of salary to the working partners - Grounds raised by the assessee are dismissed.
Issues:
Disallowance of partner's salary under section 40(b) of the Income Tax Act 1961 based on the partnership deed. Analysis: 1. The appeal was filed by the assessee against the order of the Ld. CIT(A) relating to the assessment year 2015-16, challenging the disallowance of partner's salary amounting to ?2,88,000 debited to the P & L account. The AO disallowed the salary based on section 40(b) of the Income Tax Act 1961, as the partnership deed did not specify the quantification of remuneration to partners. 2. The AO observed that the partnership deed mentioned that salary be paid as per the Income Tax Act, 1961. However, the AO disallowed the salary, stating that the partnership deed did not specify the amount of remuneration payable to each individual working partner or lay down the manner of quantifying such remuneration, as required by section 40(b) of the Act. 3. The Ld. CIT(A) upheld the AO's decision, stating that the partnership deed lacked the necessary details regarding the quantification of remuneration to partners. The Ld. CIT(A) also noted that the CBDT circular No. 739 dated 25-3-1996 emphasized the importance of specifying remuneration in the partnership deed for claiming deductions under section 40(b). 4. The assessee contended that the partnership deed was executed before the issuance of CBDT circular No. 739 and argued that the salary paid to partners was within the permissible limit as prescribed under the Income Tax Act. However, both the AO and the Ld. CIT(A) rejected these arguments, citing the absence of specific details in the partnership deed. 5. The Tribunal, after considering the arguments presented, upheld the decision of the Ld. CIT(A) and the AO. It emphasized that the partnership deed must specify the quantum or manner of calculation of remuneration to partners, as mandated by section 40(b) of the Act. The Tribunal referenced a previous judgment of the Hon'ble Delhi High Court to support its decision. 6. In conclusion, the Tribunal dismissed the appeal filed by the assessee, affirming the disallowance of partner's salary based on the inadequacy of details in the partnership deed. The Tribunal's decision was in line with the legal requirements outlined in section 40(b) of the Income Tax Act 1961 and supported by relevant judicial precedents.
|
