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TMI Blog1987 (8) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... unal is correct in holding that the payment of Rs. 7,200, to two of the four partners of the firm, in view of clause 5 of the partnership deed of the firm, was the application of the profit of the firm after it had accrued or was earned ? 2. Whether, on the facts and in the circumstances of the case, the payment of Rs. 7,200 to the two partners of the firm was an expenditure exclusively incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ahmedabad and Jaipur, respectively, and were carrying on the business of the partnership were to be paid Rs. 300 p.m. to meet their additional expenses of living in these metropolitan cities by way of city allowance. It was also stated therein that this city allowance to be paid to these two partners was not their salary, commission or other remuneration and that it will be treated as expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eafter set aside the appellate order and restored that of the Income-tax Officer. The Tribunal held that this city compensatory allowance to two of the partners of the firm was not an expenditure incurred for the purpose of carrying on the business of the firm, but it was application of the firm's income after it had been earned. It was also pointed out by the Tribunal that this payment made to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the firm. The question, therefore, is whether these payments fall within the ambit of this prohibition. It is beyond controversy that these amounts were payments made to the two partners by the firm.The only surviving question, therefore, is whether the payments fall within the meaning of the expression " interest, salary, bonus, commission or remuneration ". We have no doubt that even if the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the two branches. This fact also repels the assessee's contention. We are, therefore, satisfied that the view taken by the Tribunal about the nature of these payments made by the firm to its two partners and the conclusion that deduction of the same is prohibited by virtue of section 40(b) of the Income-tax Act, 1961, is justified. The reference is, therefore, answered against the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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