TMI Blog2011 (1) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble F.I. Rebello, Chief Justice) Income Tax Appeal No.113 of 2010 is in respect of the Assessment Year 2005-06 and Income Tax Appeal No.112 of 2010 is in respect of Assessment Year 2006-07. These are appeals by the Revenue against the orders of ITAT. They had framed several questions. In our opinion, questions 3, 4 and 5 are purely questions of fact and considering the concurrent findings recorded by the CIT (A) as also ITAT and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of firm notwithstanding the fact that such partner is a salaried working partner in some other firms and accordingly, dismissed ground No.1 of the appeal and upheld the order of the CIT (A). The question for our consideration is "whether the salary paid to a working partner, who is represented in the partnership firm as Karta of HUF, is allowable as a deduction while computing the income of the assessee-firm. 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 chargeabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tner may be accountable to the family for the monies received by him from the partnership. But, in the assessment of the firm, the partner cannot be heard to say that he has not received the commission as a partner of the firm, but in a different capacity.....A partner does not act in a representative capacity in the partnership. He functions in his personal capacity like any other partner. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly cannot be in a better position than a firm in the scheme of the Partnership Act. The reasons that led this court to hold that a firm cannot join a partnership with another ''individual' will apply with equal force to a Hindu undivided family. In law, a Hindu undivided family can never be a partner of a partnership firm. Even if a person nominated by the Hindu undivided family joins 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtner to the firm. Explanation 2.- Where an individual is a partner in a firm on behalf, or for the benefit, of any other person (such partner and the other person being hereinafter referred to as "partner in a representative capacity" and "person so represented" respectively), - (i)interest paid by the firm to such individual or by such individual 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 accou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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