TMI Blog2006 (6) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... um of Rs.1,30,000/- paid to the partner was disallowed by the Assessing Officer under Section 40(b) of the Income Tax Act and was added as the income of the firm. On appeal, the Commissioner of Income Tax (Appeals), following his earlier year's order, allowed the appeal directing the Assessing Officer to delete the addition, which was, on further appeal, confirmed by the Income Tax Appellate Tribunal. 3. Aggrieved by the same, the Revenue has filed the above appeal raising the following question of law. "Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in holding that the payments made to the partners a sum of Rs.1,30,000/- by the assessee firm were not disallowed under Section 40(b) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch earlier partnership deed; or (iv) any payment of interest to any partner which is authorised by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as such amount exceeds the amount calculated at the rate of eighteen per cent. Simple interest per annum; or (v) any payment of remuneration to any partner who is a working partner, which is authorised by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as the amount of such payment to all the partners during the previous year exceeds the aggregate amount computed as hereunder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herwise 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 as partner in a representative capacity and interest paid by the firm to the person so represented shall be taken into account for the purposes of this clause. Explanation 2.—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. Explanation 3.— For the purposes of this clause, "book-profit" means the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f which the recipient is a partner, was absent in the instant case and appropriation of commission due to the company by it from and out of the realisations from the exhibition and distribution of films cannot be said to constitute "payment of commission" to a partner attracting section 10(4)(b)." 6. Following the decision cited supra, the Andhra Pradesh High Court in Commissioner of Income Tax v. Chitra Kalpana [1988] (169 ITR 678), held as under (headnote) : "Section 40(b) of the Income-tax Act, 1961, corresponds to section 10 (4) (b) of the Indian Income-tax Act, 1922. Section 10(4)(b) was incorporated in the 1922 Act in the year 1939. The legislative history is sufficient to indicate that the provisions conta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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