1983 (6) TMI 81 - AT - Income Tax

Summary

Issues:
- Deduction of remuneration paid to Karthas as honorarium for personal exertion to earn share income.
- Disallowance of claim by ITO.
- Upholding of ITO's view by AAC.
- Reference to past decisions allowing similar salary payments.
- Justification for allowing salary payments to Karthas.

Analysis:
The consolidated appeals before the ITAT Madras-C involved the deduction of remuneration paid to Karthas as honorarium for their personal exertion to earn share income by various HUFs. The ITO disallowed the claim in all cases, stating that a partner should be compensated by the firm for special services rendered, and there was no justification for remuneration for looking after family interests. The AAC upheld the ITO's view, emphasizing that any service rendered was to the firm, not the family, and questioned the reasonableness of the remuneration claimed.

Upon hearing the parties, the ITAT considered past decisions allowing similar deductions and noted the experience and specialized knowledge of the Karthas. The ITAT found merit in the assessee's contention, referencing specific salary payments claimed as deductions for various years. The ITAT highlighted that the Supreme Court decision and the practice of allowing such payments supported the allowance of salary payments to Karthas. The absence of evidence to show the payments were not genuine led the ITAT to allow the claims of the assessees, ultimately allowing the appeals.

In conclusion, the ITAT allowed the appeals of the assessees, emphasizing the past practice of allowing salary payments to Karthas, the experience and specialized knowledge of the Karthas, and the absence of evidence to question the genuineness of the payments.