TMI Blog1994 (3) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... application are that the assessee is a firm of four partners engaged in the business of "dealer in pulses and grains". For the previous year ended October 10, 1978, corresponding to the assessment year 1979-80, the firm had paid a salary of Rs. 18,500 to two partners in their individual capacity. Those two partners represent their respective Hindu undivided families in the firm. The Income-tax Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision on the ground that the Supreme Court has held in CIT v. R. M. Chidambaram Pillai [1977] 106 ITR 292 that salary paid to the partner is nothing but a share of profit and that the Explanation added to section 40(b) recognising the representative capacity of a partner referred only to payment of interest and that could not, therefore, be applied to the payment of salary. However, after dealin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing from such situation, Parliament has come out with the Explanation to section 40(b) recognising the representative capacity of a partner in the case of payment of interest. We do not think that there can be a partial recognition of such representative capacity. Once it is recognised that the real partner is the joint family, it would follow that payment of salary could be regarded as a share of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which the gains of learning must be held to be separate property of the individual and cannot be treated as part of the income of the joint family. Once the joint family is recognised as the real partner of the firm, the law has departed from the original position of recognising only the individual as a partner and, consequently, it must also be recognised that the salary paid to the individual ..... X X X X Extracts X X X X X X X X Extracts X X X X
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