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TMI Blog2021 (3) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... ring taxable income of Rs. 9,420/-. During the course of assessment proceedings the AO noted that the assessee has debited Rs. 2,88,000/- as remuneration to partners. To verify the allowability of the same, the AO asked the assessee to produce the copy of partnership deed. From the partnership deed so submitted the AO noted at page 2 on point No. 5 where it is mentioned as under :- "That the parties hereto shall be entitled for interest on their capital investment and is entitled to a salary as per mutual consent which shall be deducted from the profit or losses of the firm before dividing the same in accordance with the proceeding but under Income Tax Act, 1961." 3. He, therefore, asked the assessee to explain as to why the remuneration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the partners at the end of the accounting period, in such cases payment of remuneration to partners cannot be allowed as deduction in the computation of the firm's income. " 4. "It is clarified that for the assessment years subsequent to the assessment year 1996-97, no deduction under section 40(b) (v) will be admissible unless the partnership deed either specifies the amount of remuneration payable to each individual working partner or lays down the manner of quantifying such remuneration. " Since the partnership deed provided by AR of the assessee neither specifies the amount of remuneration payable to each individual working partner nor lays down the manner of quantifying such remuneration which is one of the conditions prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) would be governed by the circular no.739. Also, the appellant's contention to restrict the disallowance as per the circular is not correct. This step could have been taken at the assessment stage itself which was not done. Irrespective of this fact, the disallowance itself is correct by made by the Assessing Officer. Therefore, the addition made by the Assessing Officer is sustained." 7. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds :- 1. " That Ld. CIT (A) erred on the facts and circumstances of the case and in law in upholding reasoning assumed by the AO for passing the assessment order under section 143(3) of the Income Tax Act, 1961, is bad in law and voi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e partnership deed was to be allowed. 8.2. Referring to the decision of Hon'ble Delhi High Court in the case of CIT vs Vaish Associates (2015) 63 taxman.com 90, he submitted that under somewhat similar circumstances the decision of the Tribunal allowing salary to two partners was upheld by the Hon'ble Delhi High Court. He submitted that merely because the partnership deed did not specify the amount of salary to be paid to each of the partners or had not laid down a specific method of computation thereof cannot be a ground to disallow the remuneration to partners. He accordingly submitted that the order of the Ld. CIT(A) be reversed and the grounds raised by the assessee be allowed. 9. Ld. DR on the other hand while supporting the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Sood Brij & Associates vs. CIT reported in (2011) 15 taxman.com 76 where it has been mentioned as under :- (Head notes) "Section 40(b) of the Income Tax Act, 1961- Business disallowance - interest, salary, etc. paid by firm to partners - Assessment year 2007-08 - Whether requirement of allowing deduction under section 40(b) is that remuneration paid to partners should be authorised and in terms of partnership deed - Held, yes - Whether expression ' in accordance with terms of partnership deed' read with sub-clause (iii) of section 40(b), requires and mandates that quantum of remuneration or manner of computation of quantum of remuneration should be stated in partnership deed and should not be left undetermined, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable. 14. So far as the decision of Hon'ble Delhi High Court in the case of CIT vs Vaish Associates (2015) (supra) is concerned, in that case clause 6A of the partnership deed clearly indicates the methodology and the manner of computing the remuneration of the partners and the remuneration of the partners was computed in terms thereof. However, in the instant case there is no such clause at all regarding the methodology and the manner of computing the remuneration of partners. Therefore, this decision also is of no help to the assessee . In this view of the matter and respectfully following the decision of Hon'ble Jurisdictional High Court in the case of Sood Brij & Associates vs CIT (supra) relied on by the AO, I do not find any in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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