| The Tax Publishers2019 TaxPub(DT) 6818 (Chd-Trib) INCOME TAX ACT, 1961
Section 40(b)
Contention of assessee that vide Clause 10 of partnership deed dt. 1-12-2002 salary might be increased or decreased from time to time in the interest of partnership business has not been rebutted. Also, AO himself admitted in assessment order that assessee furnished addendum to partnership deed wherein it had been mentioned that partnership deed was executed on 1-12-2002 and with effect from 1-4-2011, remuneration to partners had been increased to Rs. 12,000 each per month.Merely, for the reasons that Stamp Papers on which addendum to partnership deed was written was dt. 1-12-2002 , no disallowance could be made particularly when remuneration claimed by partners was not in excess of amount prescribed in clause (b) to section 40. Moreover, claim of assessee that in subsequent years increased salary had been accepted was not rebutted, therefore, considering totality of facts, disallowance made by AO was deleted.
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Business disallowance under section 40(b) - Remuneration to partner - Increase in remuneration supportedby addendum partnership deed - No rebuttal of clause in partnership deed for increase or decrease from time-to-time
AO noticed that assessee-firm had debited salary to partners at Rs. 12,000 p.m., however, as per terms of partnership deed dt. 1-12-2002 salary to each of partner was payable at Rs. 5,000 per month. He required the assessee to show-cause as to why excess salary claimed not be disallowed. Assessee submitted that Addendum to Partnership Deed was made on 1-4-2011 to include a clause, according to which salary @ Rs. 12,000 per month was allowed. Also salary paid by the assessee had been shown by partners in their respective returns of income. AO, however did not find merit in submissions of assessee. For the reasons that Stamp Papers on which addendum to partnership deed was written was dt. 1-12-2001. Therefore, AO made disallowance. Held: Contention of assessee that vide Clause 10 of partnership deed dt. 1-12-2002 salary might be increased or decreased from time to time in the interest of partnership business has not been rebutted Also, AO himself admitted in assessment order that assessee furnished addendum to partnership deed wherein it had been mentioned that partnership deed was executed on 1-12-2002 and with effect from 1-4-2011, remuneration to partners had been increased to Rs. 12,000 each per month. Merely, for the reasons that Stamp Papers on which addendum to partnership deed was written was dt. 1-12-2002, no disallowance could be made, particularly when remuneration claimed by partners was not in excess of amount prescribed in clause (b) to section 40. Moreover claim of assessee that in subsequent years increased salary had been accepted was not rebutted, therefore, considering totality of facts, disallowance made by AO was deleted.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. :
INCOME TAX ACT, 1961
Section 40(a)(ia)
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