2012 (5) TMI 56 - HC - Income Tax

Remuneration payable to Working partner allowed by Tribunal - Revenue appeal that the amount of remuneration has not been quantified in the partnership deed Held that - Section 40(b) (v) specifies that remuneration is to be authorized by partnership deed to a working partner, the working partner has been defined in explanation 4 opportunity Section 40(b), Clause 8 of the partnership deed relates to the entitlement of remuneration to the to the partners - It is mentioned in clause 8 of the partnership deed that remuneration will be payable as per norms fixed by the relevant provisions of the Income-tax Act, thus the quantification of the remuneration is apparent from the clause 8 - the requirement in law is that remuneration should have been authorized and the amount of remuneration shall not exceed the amount as mentioned in sub-clause (v) of Section 40 (b)- the remuneration receivable by the partners is taxable in their hands and it is not the case of the Revenue that the assessee has claimed remuneration to the working partners to avoid tax against revenue.

Summary

Issues:
1. Disallowance of remuneration to partners by Assessing Officer
2. Appeal by Appellate Authority and subsequent affirmation by Income Tax Appellate Tribunal
3. Interpretation of partnership deed clause regarding remuneration
4. Taxability of remuneration in the hands of partners
5. Finding of fact based on partnership deed clause

Analysis:
The judgment revolves around the disallowance of remuneration to partners by the Assessing Officer, which was later appealed by the appellant. The Appellate Authority overturned the Assessing Officer's decision, a ruling that was subsequently upheld by the Income Tax Appellate Tribunal. The Tribunal emphasized that remuneration should be authorized by the partnership deed and not necessarily quantified. It highlighted that the partnership deed in question clearly authorized the payment of remuneration to partners based on the relevant provisions of the Income-tax Act. The Tribunal also noted that the taxability of the remuneration in the hands of partners is crucial, emphasizing that the partners are liable to pay tax on the remuneration received. The judgment stressed that the quantification of remuneration need not be explicitly stated in the partnership deed as long as it is authorized. The Tribunal's decision was based on a factual finding regarding clause 8 of the partnership deed, which was considered by both the Appellate Authority and the Tribunal. Consequently, the High Court found no substantial question of law involved in the appeal and dismissed it in limine, citing the concurrent factual findings by the lower courts based on the partnership deed clause.