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2019 (12) TMI 200 - AT - Income TaxCommission paid by the Partnership irm to HUFs - investment of HUF funds in the assessee partnership firm - segregation of rendering of services of contribution of an individual in his individual capacity as partner and as Karta of HUF - HELD THAT:- We agree with the contention of D.R. that the rendering of services of contribution of an individual cannot be segregated into two parts, one in the capacity of partner of the assessee firm and secondly in the capacity of Karta of HUF firm but in view of proposition rendered in the case of K.S.Subbiah Pillai [1999 (3) TMI 5 - SUPREME COURT] the claim of the assessee firm gets support in the facts and circumstances of the present case. This fact cannot be controverted that both HUF have provided unsecured loan to the assessee partnership firm, which substantiate that the family funds of HUF has been used by the assessee’s partnership firm to financially support and enhance its business. When the contribution of an individual, who helps the firm in two capacities viz; first in the capacity of partner and secondly as Karta of HUF cannot be segregated satisfying and clearly establishing the factum of the services rendered towards payment of commission to the HUF but the factum of use of HUF funds by the partnership firm in the form of secured loan in the business of assessee firm, bring home the support of the proposition rendered by Hon’ble Supreme Court in the case of K.S.Subbiah Pillai (supra). Therefore, we reached to a logical conclusion that the commission paid by the assessee firm to HUFs is allowable and thus, we direct the Assessing Officer to delete the addition of ₹ 3 lakhs each to both HUF and allow the grounds of appeal of the assessee.
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