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2009 (10) TMI 676 - AT - Income TaxClaim for payment to a retired partner of the firm u/s 37 (1) - CIT (A) rejects the claim - whether the income to the extent of the remuneration paid to the retired partner in pursuance of clause 8.4 of the deed of partnership, is diverted and it has never reached in the hands of the assessee-firm - HELD THAT:- In the present case, The assessee is a firm of chartered accountants. In the assessment year 2004-05, the assessee has claimed the sum of Rs. 10,00,000 towards the contractual payment made to the retiring partner as per the terms of the deed of partnership. it is the contractual obligation on the assessee-firm to pay the retirement benefits for the period of five years in terms of clause 8.4. It is pertinent to note here that the retired partner has nothing to do with the profit earned or losses suffered by the assessee-firm, but the quantum of the retirement benefits has been fixed. In pursuance of clause 8.4, there is a charge on the profits of the assessee-firm and hence, in our opinion, if we examine the facts of this case in the backdrop of the legal principles in the precedents cited above, there is a diversion of income to the extent of the retirement benefits paid by the assessee-firm as per terms of clause 8.4 to the retired partner. We, therefore, hold that the retirement benefit paid in terms of clause 8.4 cannot be included in the total income of the assessee-firm as to that extent, the income has never reached in the hands of the assessee. We, accordingly, allow the grounds taken by the assessee. In the result, the assessee's appeal is allowed.
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