TMI Blog1994 (11) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, the following question was referred to this court under section 256(1) of the Incometax Act, 1961, for our opinion : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal's view that the sum of Rs. 27,323 being the total amount of the rebate allowed to the partners did not amount to commission and, therefore, cannot be disallowed under section 40(b) of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chit dividend made to the three partners of the firm cannot be disallowed under section 40(b) of the Act. However, the Commissioner of Income-tax (Appeals) agreed with the view taken by the Income-tax Officer and dismissed the appeal. Aggrieved by the order passed by the Commissioner of Income-tax (Appeals), the assessee filed an appeal before the Appellate Tribunal and the Appellate Tribunal held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o learned standing counsel, the amount paid by the firm to the three partners, whether the payment is of interest, salary, bonus, commission, or remuneration, would come under the purview of section 40(b) of the Act. Learned standing counsel further submitted that inasmuch as the partners were paid commission by the partnership firm, the disallowance made by the assessing authorities is in order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nership firm doing business in conducting chittrans actions. The three partners of the firm are subscribers in a chit transaction. After the auction was over, the firm paid the share of dividend to the subscribers who are the partners of the firm. It remains to be seen that the subscribers of the chit are entitled to get their share in the dividend income after the auction of the chit is over. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 40(b) of the Act, no disallowance can be made by the authorities below by applying the provisions of section 40(b) of the Act. Since the amount paid by the partnership firm is the dividend income arising out of the chit transaction to its subscribers, the Tribunal was correct in holding that section 40(b) of the Act has no application to the facts arising in this case. Accordingly, we ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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