Law:

Section:

Section 40(b ) of the Income-tax Act, 1961 - Business disallowance - Interest salary, etc., paid by firm to partner - Assessment years 1993-94 to 1996-97 - - Whether Circular No. 739 dated 25-3-1996 did not override provisions of section 40(b)(v)(1) so as to disallow salary actually paid, to partner and recorded in books of account - Held, yes - Whether circular has to be read along with section 40(b)(v) and has to be made subject to section 40(b)(v) - Held, yes - Whether section 40(b)(v) does not lay-down any condition of fixing remuneration or method of remuneration in partnership deed and all that section provides is that in case payment of remuneration made to any working partner is in accordance with terms of partnership deed and does not exceed aggregate amount as laid down in subsequent portion of section deduction is permissible - Held, yes Circulars and Notifications: Circular No. 739 dated 25-3-1996 FACTS The assessee-firm claimed deduction of the salary paid to the partners under section 40(b)(v ). Partnership deed provided that the remuneration would be as per the provisions of the Act which meant that the remuneration payable to the partners shall be quantified as per the provisions of the Act and shall not exceed the maximum remuneration provided. The Assessing Officer disallowed the salary actually paid monthly and debited regularly in the books of account as an expense on the ground that the partnership deed did not provide for payment of remuneration in terms of the CBDT Circular No. 739 dated 25-3-1996 because it did not specify the amount of remuneration payable to the individual working partners or laid down the manner of quantifying such remuneration. On appeal, the Commissioner (Appeals) held that the method of quantifying the remuneration was fixed in the partnership deed since the partnership deed clearly stated that the partners would be entitled to monthly salary as per the provisions of the Act. On second appeal, the Tribunal allowed the appeal of the revenue and held that the clause in the agreement quoted did not meet with the requirements of the circular and, therefore, deduction of the salary paid to the partners was not…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492