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TMI Blog2011 (1) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... nd questions 3, 4 and 5 as framed, no substantial question of law arises therein and consequently, those questions do not arise. Insofar as questions 1 and 2 are concerned, in our opinion, question no.1 will cover both the questions and the appeals are admitted on the said question, which reads as under in both the appeals:- "1. Whether the learned Income Tax Appellate Tribunal has erred in law and in facts in ignoring the conditions laid down in the provisions of Section 40 (b) (i) of the Income Tax Act, 1961 and explanation 4 thereto with regard to the disallowance of salary paid to partners in HUF capacity." The assessee is a partnership firm. The assessee has been paying salaries to their working partners, Sri Am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . For that purpose, we may gainfully reproduce the relevant provisions of the Act, as they stand for the relevant Assessment Years. Section 40 (b) (i) of the Act reads as under:- "40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",- (a) ... ... ... (b) in the case of any firm assessable as such,- (i) any payment of salary, bonus, commission or remuneration, by whatever name called (hereinafter referred to as "remuneration") to any partner who is not a working partner; or (ii) ... ... ... (iii) ... ... ... (iv) ... ... ... (v) ... ... ..." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The provisions of the Partnership Act and the Income-tax Act relating to partners and partnership firms will apply in full force in respect of such a partner. If any remuneration is paid or a commission is given to a partner by a partnership firm, section 40 (b) will apply even if the partner has joined the firm as a nominee of an Hindu undivided family. The Hindu undivided family or its representative, does not have any special status in the Partnership Act....The assessment of a firm will have to be made strictly in accordance with the provisions of the Income-tax Act. The law has to be taken as it is. Section 40 (b) applies to certain payments made by a firm to its partners. Neither the firm nor its partners can evade the tax law on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins a partnership, the partnership will be between the nominated person and the other partners of the firm." Our attention has, however, been invited to a Division Bench judgment of this Court in G.T. Cold Storage and Ice Factory Vs. Commissioner of Income-Tax, (2005) 275 ITR 340. Similar issue was raised before the Court in respect of assessment years 1977-78 and 1978-79. In the said case, the question for consideration was 'Whether on the facts and in the circumstances of the case, the salary allowed to Yadav Kishan Goel was addable under Section 40 (b) of the Income Tax Act, 1961? The learned Bench, after considering the said question, formulated the question. Insofar as this question is concerned, the learned Bench after examini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the firm otherwise than as partner in a representative capacity, shall not be taken into account for the purposes of this clause; (ii)interest paid by the firm to such individual or by such individual to the firm as partner in a representative capacity and interest paid by the firm to the person so represented or by the person so represented to the firm, shall be taken into account for the purposes of this clause. Explanation 3.- Where an individual is a partner in a firm otherwise than as partner in a representative capacity, interest paid by the firm to such individual shall not be taken into account for the purposes of this clause, if such interest is received by him on behalf, or for the benefit, of any other person," ..... X X X X Extracts X X X X X X X X Extracts X X X X
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