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TMI Blog2023 (1) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... of remuneration payable to the working partners of a partnership firm with reference to it s book-profit , as defined therein, in the partnership deed itself for quantifying the said remuneration. As the same is thus based on book-profit, the firm prepared two profit loss accounts, i.e., for the period up to the date of retirement (P1), and thereafter (P2), computing the remuneration to the working partner separately for each period, i.e., for settling the accounts between the partners, even as it filed, as is required to by law one return of income for the entire year. A consolidated profit loss account for the year was required to be prepared, which profit or loss is to be then appropriated amongst the partners, including remuner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of time, we find the same as a valid basis. What, then, we wonder is the controversy about, to which no answer could be provided during hearing by Sh. Kumar? We accordingly find no substance in the Revenue s case. We consider it appropriate to state that no document evidencing the retirement of Shri Sanjay Pathak, i.e., in terms of section 32 read with section 72 of the Indian Partnership Act, 1932, which concern the need to, and the manner of, public notice, in case of retirement of a partner from a partnership firm, has been placed before us as also, as apparent, before the CIT(A); his order being sans any reference thereto. The same, however, would only impact the liability of the retiring partner vis-a-vis the obligations of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the firm at the time (PB pgs. 44-48), retired w.e.f. 25/8/2015, vide deed dated 26/8/2015 (PB pgs.32-34). His remuneration was, accordingly, provided by the assessee-firm only up to 25/8/2015, by preparing two profit loss accounts for the relevant previous year, i.e., from 01/4/2015 to 25/8/2015 (P1) and from 26/8/2015 to 31/3/2016 (P2), determining the net profit, i.e., prior to the partners remuneration, for each, at Rs. 314.28 lacs and Rs. 526.38 lacs for P1 and P2 respectively (PB pg.9). Remuneration allowed to the retiring partner at Rs. 189.47 lacs on the profit for the first period (P1), in terms of Clause 2 of the partnership deed dated 01/04/2011, subject to the monetary limit specified u/s. 40(b), was claimed u/s. 37(1). Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per need of the business. Remuneration shall be paid to the working partners profit ratio to be worked out as under: (1) In case book profit is negative Rs. 1,50,000 (2) In case book profit is positive On first Rs. 3,00,000 of book-profit Rs. 1,50,000 or 90% of book profit, whichever is more. (3) On the balance of the book-profit 60% of book-profit. Explanation: For the purpose of this clause, the book profit shall mean the BOOK PROFIT as defined in section 40(b) of the Income Tax Act, 1961 or any statutory modification or reenactment thereof for the time being in force. The remuneration is payable to the working ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in CIT v. Ashokbhai Chimanbhai [1965] 56 ITR 42 (SC), wherein it stands explained that profits do not accrue from day to day or even from month to month, and have to be ascertained by a comparison of assets at two stated points. Unless the right to profit comes into existence, there is no accrual of profit, and the destination of profits must be determined by the title thereto on the day on which they arise. The concept of accrual of the profits of a business involves their determination by the method of accounting at the end of the accounting year or any shorter period determined by law. The appropriation of profit between the partners is to be in the terms of the partnership deed which, in case of it being silent thereon, as appears to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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