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TMI Blog2014 (11) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) - the advances made by Mr. Doshi to the assessee firm were from his personal fund and the commission or interest paid by the assessee to Shri. Doshi was in his individual capacity and not as a partner – it was not liable to be disallowed in view of the clear provisions of Section 40(b). In the case of Trust also, which provided financial assistance to the assessee, Shri. Doshi was one of the trustees and on the basis of the same, the AO hold that the amount was paid by the assessee to one of the partners, i.e. Shri. Desai, which is also quite contrary – relying upon Chhotalal And Co. Versus Commissioner Of Income-Tax, Gujarat [1984 (4) TMI 40 - GUJARAT High Court] - the AO could not have disallowed the amounts paid by the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents made by the assessee were to its partner, i.e. Mr. Doshi, and hence, it cannot be allowed in view of the provisions of Section 40(b) of the Income Tax Act, 1961 (for short, the Act ) and disallowed the same. The assessee, hence, preferred ITA No. 955/Ahd/1989 before the CIT(A). 4. Insofar as the facts leading to filing of the ITA No.2980/Ahd/1990 for the A.Y. 1986-87 are concerned, aforesaid Mr. Doshi was one of the trustees of a Trust, which was created by a Trust Deed in the year 1977. There were three beneficiaries of the said Trust, namely (1) Kumari Parul, (2) Shri. Kartik and (3) Shri. Haren, who were either partners or were given the benefits of partners. The trust made advances to the assessee, herein, and the assessee paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee for the relevant year was actually to its partners, and therefore, he passed the assessment order dated 23.03.1990. The assessee challenged the same before the CIT(A), which partly allowed the appeal of the assessee. Since, the assessee was not satisfied with the same, he carried the matter before the Tribunal, which passed the impugned order. Hence, the revenue preferred the present appeal, raising the following question of law; Whether, the Appellate Tribunal is right in law and on facts in deleting the disallowance of commission payment of ₹ 1,69,785/- holding that the provisions of section 40(b) are not attracted? 8. Mr. Soparkar, learned Sr. Advocate for the assessee, submitted that the Tribunal err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in BHUPENDRA NAVNITLAL AND CO. (Supra). 11. Heard, learned Counsel for the parties and perused the material on record as well as the orders of the CIT(A) and the Tribunal. Before adverting to the merits of the matter, here, it would be relevant to refer to the provisions of Section 40 and sub-Section (b), thereof, as enumerated in the Act, which reads as under; 40. Notwithstanding anything to the contrary in sections 30 to [38], the following amounts shall not be deducted in computing the income chargeable under the head Profits and gains of business or profession ,- (a) ... (b) in the case of any firm assessable as such,- (i) any payment of salary, bonus, commission or remuneration, by whatever name cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the partners during the previous year exceeds the aggregate amount computed as hereunder:- [(a) on the first ₹ 3,00,000 ₹ 1,50,000 or at of the book-profit or in case the rate of 90 of a loss per cent of the book-profit, whichever is more; (b) on the balance of the at the rate of 60 book-profit per cent:] 12. Thus, from the above provisions, it become clear that Section 40(b) deals with the commission or interest etc. made to a partner and not to an individual, where amounts were advanced by such individual from his personal fund. 13. In the case on hand, it is an admitted position that Shri. Doshi was the sole proprietor of Saurashtra Metal Supplying Co. and Jayant Trading Company, which provided financial assista ..... X X X X Extracts X X X X X X X X Extracts X X X X
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