9911796707
TMI Blog2012 (12) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Tribunal: (1) " Whether remuneration to partners should be allowed u/s 40(b)(v) only on the basis of declaration made in the partnership deed declaring them as working partner and inserting a clause for payment of remuneration to them without requiring the firm to prove that these partners are actively engaged in conducting the affairs of the business of firm to justify their status as working partner as per explanation 4 below Section 40(b)(v)?' Briefly stated the facts giving rise to the present appeal are as follows: The appeal relates to the Assessment Year 2005-2006. The assessee opp.party is a partnership firm. It is engaged in the business of manufacture and export/sale of brass art ware. During t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue preferred an appeal before the Tribunal. The Tribunal by impugned order dismissed the appeal with the following findings: "We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that all the three partners to whom the impugned remuneration was paid were its working partners and this position was accepted even by the AO while allowing remuneration paid to them to the extent of Rs.4 lakhs each. It is also not in dispute that there was a specific clause contained in the partnership deed of the assessee firm allowing payment of remuneration to the working partners and the quantum of such remuneration was agreed to be in accordance with the provisions of Section 40( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the learned counsel for the assessee wherein it was held that Section 40A has no application to the matters contained in Section 40(b) and the overriding effect given to Section 40A is only in respect of matters not covered by Section 40(b). In our opinion, the ratio of these two judicial pronouncements cited by the learned counsel for the assessee is directly applicable to the issue involved in the present case and respectfully following the same, we hold that the dis-allowance made by the AO on account of partners' remuneration covered u/s 40(b) by invoking the provisions of Section 40A(2) was not sustainable. In that view of the matter, we uphold the impugned order of the learned CIT(A) deleting the said dis-allowance and dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration to the working partners and if the remuneration are within the ceiling limit provided then recourse to provision of Section 40A(2)(a) of the Act cannot be taken. The assessing officer is only required to see as to whether the partners are the working partners mentioned in the partnership deed, the terms and conditions of the partnership deed provide for payment of remuneration to the working partners and whether the remuneration provided is within the limits prescribed under Section 40(b)(v) or not. If all the aforementioned conditions are fulfilled then he cannot disallow any part of the remuneration on the ground that it is excessive. Since in the present case, all the conditions required has been fulfilled the question of disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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