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The Tax Publishers2021 TaxPub(DT) 0475 (Gau-Trib) INCOME TAX ACT, 1961
Section 40(b)
Where assessee firm's expenditure on account of salary/remuneration to one partner was not disallowed after the supplementary deed was executed and on the principle of consistency also the claim which was rightly claimed should not have been disallowed, therefore, assessee-firm had rightly claimed the salary and remuneration to its partner as provided for in amended supplementary deed and AO was directed to allow the claim of expenditure.
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Business disallowance under section 40(b) - Remuneration paid by firm to partner - Disallowance of salary and remuneration paid to one of the partners -
During the course of assessment proceedings, the AO noted that the assessee-firm claimed salary and remuneration @ 2.50 Lakhs to each of the two partners. AO called for the deed of partnership, wherein the assessee brought to the notice of the AO that assessee firm was constituted and thereafter made certain amendments by supplementary deed of partnership. Even though AO acknowledged that the assessee had amended its partnership deed by executing the supplementary deed wherein it altered and amended clauses 4 and 10 of original deed of partnership and authorized payment of interest and salary / remuneration to fulfill in accordance to provision of section 40(b), AO denied the claim of the assessee Held: Authorities erred in disallowing the claim and misdirected themselves by looking into the clause 8 of the old partnership deed which in no way conflict with that of the subject-matter discussed in clause 10. After the supplementary deed was executed, assessee firm's expenditure on account of salary/remuneration to one partner was not disallowed. On the principle of consistency also claimed which was rightly claimed should not have been disallowed. Assessee-firm had rightly claimed the salary and remuneration to its partner as provided for in amended supplementary deed and AO was directed to allow the claim of expenditure in respect of remuneration/salary to partner.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2014-15
IN THE ITAT, GUWAHATI BENCH
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