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2012 (12) TMI 875 - HC - Income TaxRemuneration to partners - Allowance of sec 40(b)(v) only on the basis of declaration made in the partnership deed declaring them as working partner OR firm to prove that these partners are actively engaged in conducting the affairs of the business - Held that:- Section 40(b)(v) prescribed limit of remuneration which can be allowed to its partner as deduction while computing the business income. It is not in dispute that the remuneration paid to the working partners was within the provision of clause (v) of subsection (b) of Section 40 as all the three partners are working partners in the assessee opp.party firm and the AO has himself allowed the remuneration of Rs.4,00,000/- per annum to each of the partner. The Parliament in its wisdom had fixed a limit on allowing the remuneration to the working partners and if the remuneration are within the ceiling limit provided then recourse to provision of Section 40A(2)(a) cannot be taken. The AO is only required to see as to whether the partners are the working partners mentioned in the partnership deed, the terms and conditions of the partnership deed provide for payment of remuneration to the working partners and whether the remuneration provided is within the limits prescribed under Section 40(b)(v) or not. If all the aforementioned conditions are fulfilled then he cannot disallow any part of the remuneration on the ground that it is excessive. Since in the present case, all the conditions required has been fulfilled the question of disallowance does not arise.
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