Appeal against ITAT order allowing deduction of partner remuneration dismissed. Bench upheld disallowance under Section 40(b)(v) for lack of terms in partnership deed specifying remuneration.
Appeal dismissed with no costs. The disallowance of remuneration under Section 40(b)(v) was affirmed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
WEDNESDAY ,THE FOURTEENTH DAY OF DECEMBER TWO THOUSAND AND TWENTY TWO
PRESENT
THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HON'BLE SRI JUSTICE C.V. BHASKAR REDDY
INCOME TAX TRIBUNAL APPEAL NO: 203 OF 2006
Appeal Under Section 260A of the lncome Tax Act 1961 against the order dated 22-11-2005 in ITA No. 992/ Hydl 2004 ( Asst. Year 200'l-20021 on the file of the lncome Tax Appellate Tribunal, Hyderabad Bench - B, Hyderabad preferred against the order of the Commissioner of lncome Tax (Appeals) Vl , Hyderabad dated 03-08-2004 in Appeal No. 0248M-9 (3) / HYD/ CIT (A) -Vl I 2003 -04 preferred against the order of the lncome Ta Officer, Ward -9 (3) , Hyderabad dated 30-01-2004 in PAN / GIR No. E-305 /9 (3) / 2001-o2
Between:
M/S. EGG GUARD, 7-2-104119, Sudershan Complex, Tirumala Colony, L.B.Nagar, ...APPELLANT Hyderabad. AND
INCOME TAX OFFICER, Ward-9(3), 13th floor, Gagan Vihar, M.J. Road, ...RESPONDENT Hyderabad.
Counsel for the Appellant: SRl. M. M. FIRDOS ( Not present )
Counsel for the Respondent: Ms. SAPNA REDDY ON BEHALF OF SRI B. NARASIMHA SARMA
The Court delivered the following: JUDGMENT
THEHo BLE HE EF TI UII BHI.IYAN
AND
H S
I.T.T.A.No.203 of2006
JUDGMENT,4aTtbe llot'bbtbeCbbf lttttiz Ujial Bhryaa)
None hasaPpeared for the aPpellafltwhenthe matter is
called upon thoughMs. SapnaReddy,learned counsel is present on behalf of Mr.B.Narsimha Sarma, learned counsel for the respondent.
"Whether the Income Tax Appellate Tribunal .8, Bench, Hyderabad was lcgally cofiect in holdrng that the tequirements of the provisions of Section a0@) (v) of Income'I'ax Act, 1961 are lacking in the facts and circumsances of the case and evidence on record entiding the assessee to seek deduction of the amount of remuneradon paid to the partnets from its income chargeable to tax under Income Tax Act, 1961 ?
::3::
offrcer held thatappellantdid not specift the amount of remuneration payableto each individualworking Parmernor did it Iay down the manner ofquantiffingsuch remuoeration'Hence' deduction of theremuneration claimedby the appellant to have been paid to thepartners was disallowed and added back to the income o[ theappellant vide theassessmentorder dated 30.01.2004.
7 The aforesaidorder o[ the assessing officer was challenged by the appellantbefore the Commissioner ofIncome Tax (Appeals)-Vl,Hyderabad @riefly'CIT(A)' hereinafter)'By the appellate orderdated 03.08.2004, CIT(A)dismissedthe appeal of the appellantand affirmedthe disallowance made by the assessing olficer.
4
..5..
25.03.1996, which is as under:
It is clarified that for the assessment years subsequent to the assessment year 1996-97, no deduction under Section 40@)(v) will be admissible unless the parmetship deed either specifies the amount of temuneration payable to each individual wotking partner or lays down the manner of quantiSing such remuneration.
1.1.. This was examined by the CIT(A) whereafter it was held that the above circular of the CBDT is clarificatory in nature and it only clarifies the provision contained in Section a0@)(v) of theAct.
Before us, the assessee has put forth the same contention whereas learned DR has claimed that the ptovision of Section 40(b) of the Act is very clear and the circular issued by the Board is in consonance with the above ptovision. We find merit in the case made out by the revenue in so far as the ptovision of the Act is very clear with reFerence to payment of remunetation tothe working partners in case of a firm. It clearly states that the payment has to be authorized by the partnershipdeed and the same has to be in accordance with the terms of the patnership dced. In the irnpugned Partncrshipdccd
) )
::6
no teffns for payment to the working parmers have been stipulated. In this view of the mamer, we hold that the payment made to the partners amounting to Rs.1,08,000/- is not an allowable dedication as per Section 40@)(v) of the Act Therefore, this ground of the assessee is dismissed.
\
7
I
dismissed. No costs.
As a sequel, miscellaneous petitions, pending if any, stand
dismissed.
/
Sd/A.S.CH]RANJEEVI JOINT REGISTRAR //TRUE COPY// (-fb SECTTON OFFICER
To
HIGH COURT
DATED:14l1212022
JT]DGMENT
ITTA.No.203 of 2006
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DISMISSING THE ITTA WITHOUT COSTS
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1
2 issues framed by the court
Whether the Income Tax Appellate Tribunal was legally correct in holding that requirements of Section 40(b)(v) were lacking to allow deduction of remuneration paid to partners.
Whether a partnership deed stands as authorized if it does not specify remuneration amounts or laying down quantification manner.
2 provisions across 1 enactments
M/S. EGG GUARD
INCOME TAX OFFICER
UJJAL BHUYAN
C.V. BHASKAR REDDY
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
