TMI Blog2009 (3) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... re and export/sale of brass art ware. A return of income for the year under consideration was filed by it on31st Oct., 2005declaring a total income of Rs. 57,68,627. In the said return, deduction of Rs. 39,31,965 was claimed by the assessee firm on account of remuneration paid to its partners. During the course of assessment proceedings, it was noticed by the AO that the salary paid by the assessee firm to all other employees is only Rs. 4,86,918. He also noticed that the partnership deed of the firm does not specify the function and responsibilities of the working partners so as to justify the remuneration of Rs. 13,10,655 paid to each of the three partners. He also noted that as per the relevant clause of the partnership deed, the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause of the partnership deed was within the ceiling prescribed in s. 40(b) and the AO having not made out a case that the quantum of such remuneration was in excess of the said ceiling, the disallowance made by him on this issue was not sustainable. He, therefore, deleted the disallowance made by the AO out of remuneration paid by the assessee firm to its partners. Aggrieved by this relief allowed by the learned CIT(A) to the assessee, the Revenue has preferred this appeal before the Tribunal. 4. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that all the three partners to whom the impugned remuneration was paid were its working partners and this position was accepted even by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een applied. It was held by the Tribunal that the AO thus has no power to go into the question of reasonableness of remuneration paid by the firm to its partners and he can only examine whether the remuneration is not exceeding the prescribed limits as laid down in s. 40(b). To the similar effect is the decision of Hon'ble Karnataka High Court in the case of N.M. Anniah Co. vs. CIT 1975 CTR (Kar) 78 : (1975) 101 ITR 348 (Kar) cited by the learned counsel for the assessee wherein it was held that s. 40A has no application to the matters contained in s. 40(b) and the overriding effect given to s. 40A is only in respect of matters not covered by s. 40(b). In our opinion, the ratio of these two judicial pronouncements cited by the learned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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