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2018 (8) TMI 1716 - AT - Income TaxAddition as unexplained cash credit, which was capital introduced by the partner - Held that:- It is well settled that if there are cash credit entries in the books of a firm, in which the accounts of the individual partners exist, and it is found as a fact that cash was received by the firm from its partners, then, in the absence of any material to indicate that they were the profits of the firm, it could not be assessed in the hands of the firm. No material has been brought on record by the Revenue to show that the amount of ₹ 11 lakhs shown as capital introduced by the partner Smt. Lalita Jain was the profits of the firm. Therefore, in view of the decision of Hon’ble Allahabad High Court in the case of Jaiswal Motor Finance (1983 (2) TMI 47 - ALLAHABAD HIGH COURT), no addition in the hands of the firm can be made as unexplained cash credit u/s.68 of the Act. We, therefore, set aside the orders of lower authorities and delete the addition of ₹ 11 lakhs and allow this ground of appeal of the assessee. Not allowing deduction for partner’s remuneration u/s.40(b)- Held that:- We find that above clause of the partnership deed provides for payment of remuneration to partners which would be as per the provisions of the Act, which meant that the remuneration payable to partners would be quantified as per the provisions of the Act and shall not exceed the maximum remuneration provided. It is not in dispute that the partners were paid remuneration, which was less than the maximum provided by the Act. None of the authorities have disputed the payment of remuneration and has accepted the books of account of the assessee as correct and, therefore, the remuneration was deductible while computing the income of the assessee firm. We, therefore, set aside the orders of lower authorities and delete the disallowance. Adhoc disallowance of 20% out of salary paid to employees by the firm - Held that:- No material has been brought on record by the revenue to show that the expenses claimed on account of salary expenses to staff is excessive or inflated. The disallowance made by the AO is only on the ground that in his opinion, the expenses claimed are not corroborated with justifiable facts. Merely on the basis of surmises and conjectures of the AO, no disallowance of expenditure made by him out of genuine business expenditure of the assessee can be sustained in law without any material being brought on record to show that either the expenses are not genuine or they are inflated. Therefore, set aside the orders of lower authorities and vacate the disallowance - decided in favour of assessee
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