9911796707
TMI Blog2019 (2) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO noted that the assessee firm has claimed remuneration to partners amounting to Rs. 99,46,818/-. From the Partnership Deed filed in support of the saidclaim, it was noted that there was no remuneration clause in the Partnership Deed.Upon show cause, the assessee firm submitted a deed of rectification of Partnership Deed. It was submitted that due to oversight, the provision of salary and remuneration to partners were excluded in the original Partnership deed and the same was inserted inthe deed of rectification of Partnership deed. The AO examined the deed of rectificationof Partnership deed and observed that still the relevant clause did not specify the amount of remuneration payable to each individual working partner or lays down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in para no. 2 to 4 of its order. The operative portion of the order of Ld. CIT(A) is contained in para no. 4 of its order and the same is reproduced below:- 4. Decision: I have carefully considered the submissions and arguments of the AR of the appellant firm. I have also carefully gone through the basis of disallowance of remuneration uls.40(b)(v) in the assessment order. The relevant facts are as under:- i.) There was no clause of remuneration in the original Partnership deed dt.175.2005 in which 'deed of rectification to Partnership deed dated 5th October 2005 was inserted. It was claimed that under clause 6, the basis of payment of remunera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the Anil Hardware Stores(supra) which has been relied by the appellant firm and held that.. Section 40(b) relates to firms and the sub-clauses (I) to (v) are interconnected and have to be read harmoniously. The aforesaid clauses prescribe the condition when and in what circumstances remuneration paid to a partner is deductible as an expense from income of the partnership firm. One of the prescribed requirements is that payment of remuneration should be made to a working partner and authorized by and in accordance with the terms of the partnership deed. The remuneration paid to the said partners must relate to the period falling after the date of such partnership deed. Sub clause-(iii) to section 40(b) specifically stipulates t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remuneration is also not specified It is not sufficient to mention that provision for salary and remuneration is computed as provided in section 40(b)(v) of the Act. The rectified Partnership deed has to be read alongwith original deed and from the relevant clause-6. It is clear that the requirement of section 40(b)(v) are not satisfied. Thus considering facts and circumstances of the instant case, the Board's circularNo.739 dt.25.3.1996 and case laws referred above particularly Delhi High Court in case of SoodBrij& Associates (Supra), I am of the opinion that the disallowance made by the AO is justified and thus upheld. Hence the grounds filed by the appellant firm on this issue is therefore dismissed. 5. Ld. AR reiterated the same a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsent have agreed to make provisions for the payment of interest on capital invested by the partners at the rate of 12% per annum or any other rate as prescribed under I.T. Act. b) It has also been mutually agreed between the parties to these presents to make provisions for the payment of remuneration hitherto given to both the working partners hereto with effect from 16th April 2005. The provision for salary /remuneration is computed as provided in section 40(b)(v) of the I.T Act 1961 or any statutory enactment thereto and the same shall be distributed in their profit sharing ratio. The profit and loss of the business of the firm shall be arrived at after accounting for the said remuneration and interest so payable to the partners as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the view that Clause-6 of partnership deed of the assessee specifically contains that the salary /remuneration is to be computed as provided in section 40(b)(v) or any statutory enactment thereto. It has also been quantified that the profit and loss in the business of the firm shall be arrived at after accounting for the said remuneration and interest so double to the partners as the business expenditure of the firm. 11. Therefore, keeping in view of our above findings, we set aside the order of revenue authorities and allow the claim of remuneration paid to the partners. With these observations, we allow this ground of appeal raised by the assess. 12. In the net result, the appeal filed by the assessee stands allowed with no o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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