TMI Blog2019 (2) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... f remuneration in the partnership deed. All that the section provides is that in case the payment of remuneration made to any working partner is in accordance with the terms of the partnership deed and does not exceed the aggregate amount as laid down in the subsequent portion of the section the deduction is permissible. The remuneration had to be worked out based on certain percentage of the book profit. We are of the considered that that the provisions of section 40(b)(v) as well as clause of the partnership deed are to be interpreted harmoniously. While relying upon the judgments cited above, we are of the view that Clause-6 of partnership deed of the assessee specifically contains that the salary /remuneration is to be computed as pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed and the same was inserted inthe deed of rectification of Partnership deed. The AO examined the deed of rectificationof Partnership deed and observed that still the relevant clause did not specify the amount of remuneration payable to each individual working partner or lays down manner of quantifying such remuneration, which is an important criteria for allowance of deduction u/s40(b)(v). The AO referred the CBDT circular No. 739 dt.25.03,1996. The AO clearly mentioned that the case of the assessee firm falls under para 3 of the circular which clearly barred the allowance of deduction if the same has not been quantified nor even the limit of total remuneration is specified. The AO further examined the deed of rectification of Partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) in the assessment order. The relevant facts are as under:- i.) There was no clause of remuneration in the original Partnership deed dt.175.2005 in which 'deed of rectification to Partnership deed dated 5th October 2005 was inserted. It was claimed that under clause 6, the basis of payment of remuneration has beenincluded. ii) The clause 6 o rectification deed which is quoted in the appellants submission doesnot provide a specific amount or the basis of computation of such amount. iii) The infirmities in deed of rectification of Partnership deed dated 5sth October 2005 has been pointed oi by the AO in the assessment order. iv. The appellant has placed reliance on the judgment of Anil Hardware Stores 323 ITR368 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irements is that payment of remuneration should be made to a working partner and authorized by and in accordance with the terms of the partnership deed. The remuneration paid to the said partners must relate to the period falling after the date of such partnership deed. Sub clause-(iii) to section 40(b) specifically stipulates that remuneration paid in the period pre and post the partnership deed, are treated differently. Former cannot be deducted from the income of the firm but payment of remuneration to working partners post the partnership deed authorized by and in accordance with the terms of the deed can be allowed as a deduction. The requirement for allowing deduction is that the remuneration paid should be authorized and in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s circularNo.739 dt.25.3.1996 and case laws referred above particularly Delhi High Court in case of SoodBrij Associates (Supra), I am of the opinion that the disallowance made by the AO is justified and thus upheld. Hence the grounds filed by the appellant firm on this issue is therefore dismissed. 5. Ld. AR reiterated the same arguments as were raised before Ld. CIT(A), which is at para no. 3 of the order of Ld. CIT(A). Ld. AR relied upon the judgments in the case of ACIT vrs. Modern Motors (2016) 48 ITR (Trib) 579 (Jaipur), Durga Dass Devki Nandan Vrs. ITO (2012) 342 ITR 17(HP), CIT Vrs. Vaish Associates (2015) 280 CTR (Del) 605 and CIT Vrs. Anil Hardware Store (2010) 323 ITR 368 (HP). 6. On the other hand, Ld. DR relied upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 005. The provision for salary /remuneration is computed as provided in section 40(b)(v) of the I.T Act 1961 or any statutory enactment thereto and the same shall be distributed in their profit sharing ratio. The profit and loss of the business of the firm shall be arrived at after accounting for the said remuneration and interest so payable to the partners as a business expenditure of the firm. 9. We have also considered the provisions of section 40(b)(v) and Circular No. 739 dated 25.03.96. After taking cumulative effect of the facts of the present case, relevant clause of partnership deed and judgments cited by both the parties, we are of the considered view that a reading of section 40(b)(v) clearly shows that amount of remuneration ..... X X X X Extracts X X X X X X X X Extracts X X X X
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