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2019 (2) TMI 897 - AT - Income TaxDisallowance on account of remuneration paid to partners of the firm - assessee is a law firm (partnership) and derived income under the head “profit and gains of business & profession” and “income from other sources” - whether remuneration paid to all the partners will be the amount of remuneration allowable u/s 40(b)(v) of the Act to be shared amongst themselves in their profit-sharing ratio in that year? - contention of the Assessing Officer is that the CBDT in circular No. 739 dated 25/03/1996 has clarified the position of the salary/remuneration paid to partners as provided u/s 40(b)(v) - Held that:- The finding of the AO as well as Ld. CIT(A) on this issue is not correct. The partnership deed has specified that the amount of remuneration allowable u/s 40(b)(v) would be the amount of remuneration paid to the partners and same would be shared in their profit-sharing ratio in that year. The profit-sharing ratio of the partners has been specified as 2/3rd ( Sh Rajiv K Luthra) and 1/3rd ( Sh Mohit Saraf). The assessee accordingly paid total remuneration of ₹ 45,00,000/-in the profitsharing ratio to both the partners. In our view, the clause of the partnership deed satisfies the requirement of the CBDT circular (supra) and there is no violation on the part of the assessee in this regard. As decided in the case of Vaish Associates [2015 (8) TMI 855 - DELHI HIGH COURT] the partners were entitled to annual salary equivalent with percentage of profit multiplied by the allocable profit calculated as per the provisions of section 40(b)(v) of the Act. In the instant case also remuneration has been shared in the profit-sharing ratio. The issue in dispute also deserve to be allowed on the principle of consistency as identical disallowance has been deleted by the Ld. CIT(A) immediately preceding assessment year i.e. 2009-10 and no appeal has been preferred by the Department on the said issue before the Tribunal. - Decided in favour of assessee.
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