9911796707
TMI Blog2006 (6) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Income Tax Act, 1961?" 4. Before proceeding further, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; accordance with, any earlier partnership deed, so, however, that the period of authorisation for such payment by any earlier partnership deed does not cover any period prior to the date of such 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 wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.—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 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 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 individua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company was carrying on an independent business of distribution of films produced by various persons including the assessee-firm and hence the income which the company received in the course of carrying on their business was the income of the company and not that of the persons whose pictures they are exhibiting. Therefore, the requirement for applying section 10 (4)(b), namely, that the amount out of which the commission was paid must be the income of the firm of 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 exhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computing the firm's income because of section 40(b). Where, however, a partner is under no legal obligation to provide any particular service or involve himself in any particular activity, the payment made to him as a quid pro quo for such services and activities would not fall under section 40 (b) of the Act. In other words, such a payment is a permissible deduction while computing the income of the firm." (emphasis supplied) 7. On the facts of the case, it was found that payments were not in their capacity as partners, but were made for the specific services rendered by them. Applying the ratio laid down in the aforesaid decisions, we have no hesitation to uphold the order of the Tribunal in holding& ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
