INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Commission paid by Partnership firm to HUF - Allowability -

Assessee filed this appeal before Tribunal contending that CIT(A) was wholly unjustified in holding that commission paid to HUF of two partners for services render was not allowable in the hands of the firm. Assessee vehemently pointed out that commission of Rs. 3 lakhs each paid to HUFs of two partners for services rendered was an allowable business expenditure and should be allowed in the hands of firm. Held: Rendering of services of contribution of an individual could not be segregated into two parts, one in the capacity of partner of assessee firm and secondly in the capacity of Karta of HUF firm but in view of proposition rendered in the case of K.S. Subbiah Pillai (1999) 237 ITR 11 (SC) : 1999 TaxPub(DT) 1215 (SC) the claim of the assessee firm gets support in the facts and circumstances of the present case. When contribution of an individual, who helps the firm in two capacities viz; first in the capacity of partner and secondly as Karta of HUF could not be segregated satisfying and clearly establishing the factum of services rendered towards payment of commission to HUF. Therefore, commission paid by assessee-firm to HUF was allowable.

REFERRED : K.S. Subbiah Pillai v. CIT (1999) 237 ITR 11 (SC) : 1999 TaxPub(DT) 1215 (SC)

FAVOUR : In assessee's favour

A.Y. :

SUBSCRIBE FOR FULL CONTENT