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Issues:
- Denial of standard deduction claimed by the assessee under s. 16(1) of the IT Act, 1961. - Whether a partner is entitled to standard deductions out of the remuneration received from the firm for services rendered. Analysis: The appeal was against the order upholding the denial of standard deduction claimed by the assessee under s. 16(1) of the IT Act, 1961 for the remuneration received from a firm. The authorities contended that there was no employer-employee relationship between the firm and the partner, hence standard deduction was not permissible. The firm's partner received remuneration for services rendered, and the share of profit was separately assessed. The departmental representative relied on the Supreme Court's ruling that there is no employer-employee relationship between a firm and a partner. The Tribunal observed that the remuneration was assessed only in the hands of the individual partner, not the HUF. The key issue was whether the partner was entitled to standard deduction under s. 16(1) of the Act. The Madras High Court's decision in a similar case supported the partner's right to remuneration for services rendered to the firm. The Tribunal also cited the Bombay Bench's decision that partners are entitled to standard deductions from remuneration received for services. The Tribunal emphasized that a partner can draw a salary from the firm and is entitled to statutory deductions under s. 16 of the Act. Respecting the precedent set by the Tribunal, the appeal was allowed, and the orders denying standard deduction were reversed. The Tribunal directed the ITO to allow the standard deduction under s. 16(1) of the IT Act, 1961. The decision was based on the partner's entitlement to remuneration for services rendered to the firm, as established by relevant legal precedents.
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