TMI Blog2011 (12) TMI 780X X X X Extracts X X X X X X X X Extracts X X X X ..... TDS on commission paid to partners. 3. Briefly stated the facts of the case are that the assessee had paid sales commission @ 2% to the partners amounting to Rs. 51,01,510/- in accordance with the terms of partnership deed (clause 15) and section 40(b) read with section 28(v) of the Income Tax Act, 1961 (in short 'the Act'). The Assessing Officer required to the assessee to submit evidence of TDS on commission to partners and the assessee had submitted that the provisions of TDS are not applicable in respect of commission / remuneration / bonus / salary/ interest etc. paid to the partners of a firm as it was merely an allocation of profit to be assessed in the case of firm or its partners. The Assessing Officer was not satisfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of non deduction of TDS on the aforesaid payment to the partners, the provisions of section 40(a)(ia) of the Act were held applicable and the said amount was disallowed by Assessing Officer. The CIT(A) noted the relevant clauses of the partnership deed under which in addition to the salary paid to the partners, it was provided that commission at the rate 2% of the total sales of the year shall be paid to the partners. The profit and loss and after adjusting of salary and commission to the working partners was to be divided in the ratio of 50% each. The CIT(A) held that the partner and the firm were not separate assessees and it cannot be said that they are acting on behalf of the firm because they themselves constitutes a partnership firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of loss for the year is to be apportioned amongst the two partners in the ratio of 50% each. 6. The Finance Act, 1992 w.e.f. 1.4.1993 had amended the provisions with regard to the assessment of a firm u/s 184 of the Act. It has been provided that a firm shall be assessed as a firm for the purpose of this Act, if (i) the partnership is evidenced by an instrument and (ii) the individual shares of the partners are specified in that instrument. Clause (b) under section 40 was also substituted by the Finance Act, 1992 w.e.f. 1.4.1993 under which it had been provided that where the terms of partnership deed provide for the payment of salary, bonus, commission or remuneration, by whatever name called, and the same is paid to any working pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;ble Supreme Court in CIT Vs. R.M. Chidambaram Pillay [1977] 106 ITR 292 (SC), wherein it was further held as under:- A firm is not a legal person even though it has some attributes of personality. In income-tax law a firm is a unit of assessment, by special provisions, but is not a full person. 8. In view of the proposition laid down by various courts including Hon'ble Supreme Court that firm is only a unit of assessment and not a legal person, there cannot be a contract of service between a firm and any of its partners. In the facts of the present case, the commission was paid to the partners of the assessee firm as per the convenants in the partnership deed i.e. an agreement between the partnership firm and its partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of CIT(A) in this regard and dismiss the grounds of appeal raised by the Revenue. 6. We also find that similar findings have been given by the Tribunal in assessment year 2007-08 in the case of assessee in ITA No. 1210/Chd/2010 order dated 29.11.2010. While deciding the appeal for assessment year 2007-08, the Tribunal has followed its earlier order passed in assessee s case for assessment year 2006-07. There is no change in facts and therefore, respectfully following the orders of the Tribunal referred to above passed in assessee s case, we do not find any merit in the appeal of the Revenue and hence the same is dismissed. 7. In the result, appeal is dismissed. Order Pronounced in the Open Court on this 27th day of December, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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