2002 (9) TMI 41 - HC - Income Tax

Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in overlooking the decision of the jurisdictional High Court in the case of A. S. K. Rathnaswamy Nadar Firm v. CIT and of the Patna High Court in the case of Chandmul Rajgarhia v. CIT and holding that the salary paid to the partners should not be disallowed under section 40(b) - we hold that the salary paid to the partners who represented their Hindu undivided families was required to be disallowed under section 40(b).

Summary

The High Court of Madras held that the salary paid to partners representing Hindu undivided families in a partnership firm should be disallowed under section 40(b) of the Income-tax Act, 1961. The Tribunal's decision to allow the deduction was overturned based on previous court judgments. The court also addressed the issue of the tax amount involved and the applicability of a circular from the Central Board of Direct Taxes. The decision was based on the precedent set in the case of R. M. Appavu Chettiar Sons v. CIT [2002] 256 ITR 289.