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TMI Blog2012 (12) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee opp.party firm and the AO has himself allowed the remuneration of Rs.4,00,000/- per annum to each of the partner. The Parliament in its wisdom had fixed a limit on allowing the remuneration to the working partners and if the remuneration are within the ceiling limit provided then recourse to provision of Section 40A(2)(a) cannot be taken. The AO 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 disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question, the assessee opp.party filed its return of Income on 31.10.2005 declaring a total income of Rs.57,68,627/- along with audited accounts and tax audit report required under Section 44AB of the Act . The return was processed under Section 143(1) of the Act. The case was selected under scrutiny and also a notice was sent under Section 143(2) of the Act. The assessment was finalized on 28.12.2007. During the course of assessment proceeding the Assessing Officer noticed that the assessee had paid remuneration to its partners to the tune of Rs.39,31,965/- whereas it has paid total salary to its employees only Rs.486918/-. The submission is that the partnership deed does not specify the functions and duties in respect to working partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee firm to its working partners for the year under consideration amounting to Rs.3931165/- was within the ceiling prescribed in the provisions of Section 40(b) and it is not the case of the department that the said remuneration was in excess of such ceiling. The only contention raised by the learned DR before us has been that the remuneration paid by the assessee firm to its working partners aggregating to Rs.3931165/- was highly excessive and unreasonable having regard to all the facts of the case as highlighted by the AO and such excessive portion of the said remuneration worked out by the AO at Rs.2731965/- was rightly disallowed by him invoking the provisions of Section 40A(2). In this regard, the learned counsel for the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have heard Sri S.Chopra learned counsel for the appellant and Sri Piyush Kaushik,learned counsel on behalf of the respondent-assessee. Sri Chopra submitted that in the partnership deed the terms and nature of the duties of each of the partners is not specified and therefore, if the Assessing Officer has found that they have been paid excessive remuneration even though the partnership deed provided such payment he could have disallowed the same. He placed reliance upon Section 40A(2)(a) of the Act. He submitted that when the total payment of salary to all its employee was only Rs.4,86,918/- then there was no justification for payment of Rs.39,31,165/- as remuneration to the partners. The submission is wholly misconceived. It is not in dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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