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TMI Blog2018 (6) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... firm is entitled to deduct the remuneration paid to the partners under section 40(b)( v) - Decided in favor of assessee. - I.T.A. No. 2515/Ahd/2016 - - - Dated:- 31-5-2018 - Shri Waseem Ahmed, Accountant Member And Shri Mahavir Prasad, Judicial Member Appellant by : Shri M. K. Patel, A. R. Respondent by : Shri T. Sankar, Sr. D. R. ORDER Per Waseem Ahmed, Accountant Member The captioned appeal has been filed at the instance of the assessee against the appellate order of the Commissioner of Income Tax(Appeals)-5, Ahmedabad [CIT(A) in short] vide appeal no.CIT(A)- 5/DCIT Cir.5(2)/323/2015-16 dated 24/08/2016 arising in the assessment order passed under s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same was effective from 01-04-2013. Therefore, the same cannot be applied to the year under consideration i.e. F.Y. 2012-13. Accordingly, the assessee was show-caused vide note sheet entry dated 11-12-2015 for the disallowance of remuneration paid to the partners. 5. In compliance thereof, the assessee vide letter dated 29-12-2015 submitted that a supplementary partnership deed was made immediately after the formation of partnership deed dated 18-05-2006 authorizing the payment of remuneration to the partners as per the provisions of Section 40(b) of the Act. 6. The assessee also submitted that the remuneration paid to the partners in the A.Y. 2009-10 was allowed by the AO in the assessment framed u/s 143(3) of the Act vide ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration to the working partner shall be credited to his/her respective account at the end of the account year on the ascertainment of book profit as defined in Section 40(b) of the Income Tax Act or any statutory modification or re-enactment, thereof for the time being in force. the partners are entitled to withdraw the amount against remuneration payable to them from time to time and difference of remuneration payable and actual payment made to partners during the year towards remuneration shall be adjusted at the end of the year. The remuneration shall be payable to partners with effect from 1st April, 2006... From the above clause mentioned in the supplementary partnership deed the AO observed that the above clause relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Section 40(b) of the Act, after considering the statutory modification or re- enactment thereto for the time being in force. Therefore, the assessee has worked out the remuneration on the basis of revised limits mentioned in the amended provision of Section 40(b) of the Act. However, the Ld. CIT(A) disregarded the contention of the assessee and confirmed the order of the AO by observing as under: 3.3. The AO has disallowed excessive remuneration claimed by the assessee u/s.40(b) of the Act on the ground that no remuneration over and above the quantum of the remuneration has already specified by the assessee in the supplementary partnership deed can be allowed to the assessee. 3.4. During the course of appellate proceedings, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication or reenactment thereof for the time being in force. It is the view of the AO that the above clause relates to ascertainment of book profit and not the remuneration payable to the partners. A perusal of supplementary deed shows that amount of remuneration was specified in the deed therefore the view taken by the AO is justified. Accordingly the addition made by the AO is confirmed. Thus the ground of appeal is dismissed 10. Being aggrieved by the order of Ld. CIT(A), assessee is in second appeal before us. The Ld.AR before us submitted that remuneration was credited in the accounts of working partners as per the clause of partnership deed, which inter alia contains the clause that profit shall be determined as per the amended p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whereas, the assessee claims that the limit for the remuneration to the partners under clause 40(b) has been enhanced from ₹ 75,000 to ₹ 3,00,000 w.e.f. 01-04-2010 and the firm was authorized to determine the remuneration payable to the partners in pursuance to the amended provisions of Section 40(b) of the Act. The assessee, in support of his claim has relied on the clause of the partnership deed which reads as under: The remuneration to the working partners shall be credited to his/her respective account to the end of the accounting year on the ascertainment of book profit as defined in Section 40(b) of the Income Tax Act or any statutory modification or re-enactment, thereof for the time being in fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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