TMI Blog1995 (8) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... ta" produced by the firm. His share of profit in the firm was Rs. 10,320 which was declared as the income chargeable to tax. The receipt of Rs. 50,000 was claimed to be not assessable in the year under consideration as the assessee was maintaining his accounts on cash basis and no actual payment had been made to him by the firm. It was by way of an annuity purchased by the firm for his benefit. The returned income of Rs. 10,320 was accepted by the Income-tax Officer in the assessment order dated 29-9-1982. 3. In the firm's assessment, the said sum of Rs. 50,000 was treated as remuneration paid to the assessee and was disallowed under section 40(b) of the IT Act and his share in the assessed income of the firm under section 67 was determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tner's share in the income of the firm. In terms of section 67(1)(b), where the amount apportioned to the partner under clause (a) is a profit, any salary, interest, commission or other remuneration paid to the partner by the firm in respect of the previous year shall be added to that amount and the result shall be treated as the partner's share in the income of the firm. Thus in the phraseology under section 67(1)(b), the remuneration received by the appellant would form part of the share income and is not susceptible of being accorded a separate treatment in the course of proceedings under section 155(1). A separate treatment in relation to such remuneration might have been possible, if a plea to that effect had been raised in the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the total income of the previous year shall be deducted from the total income of the firm and the balance ascertained and apportioned among the partners. Clause (b) of sub-section (1) of section 67 provides that where the amount apportioned to the partner as above is a profit, any salary, interest, commission or other remuneration paid to the partner by the firm in respect of the previous year shall be added to that amount and the result shall be treated as the partner's share in the income of the firm. The computation under section 67 is not absolute, but is subject to other provisions of the Act, say : (1) The expenses incurred to earn such income are to the allowed [See CIT v. Ramniklal Kothari [1969] 74 ITR 57 (SC)]; (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner of Income-tax under section 263 in the firm's case for assessment year 1978-79, i.e., the immediately preceding year, vide order dated 20-9-1990. 5. The only objection of the CIT (Appeals) in the present case is that the computation of income of the firm was subject to disallowance/addition of this amount under section 40(b) and section 67 of the IT Act and the ITO in the assessment of the partner is precluded to consider the claim of the assessee particularly when the ITO was resorting to rectification by invoking the provisions of section 155 and on that ground, as aforesaid, he distinguished the decision of the Full Bench of the Patna High Court in Atma Ram Budhia's case on this limited jurisdiction of the ITO under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm was completed on 31-3-1981 disallowing the amount of Rs. 50,000 under section 40(b) and allocating the same under section 67 to the assessee. The assessment of the assessee was completed on 29-9-1982 accepting the returned income of the assessee. This might be because the factum of the firm's assessment was not within the knowledge of the ITO or brought on the assessment record of the assessee though both the assessments were completed by the same ITO. He included the entire income of the assessee as per the assessment order of the firm by referring to the provisions of section 155 and that was the first occasion for the inclusion of the income and also for the assessee to put forward his objections. No opportunity was given to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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