[2019] 101 taxmann.com 397 (Mumbai – Trib.)

IOn harmonious interpretation of provisions of section 40(b)(v) as well as clauses of partnership deed, claim of remuneration paid to partners despite ‘quantum’ not specified in partnership deed was to be allowed

Section 40(b) of the Income-tax Act, 1961 – Business disallowance – Interest salary, etc., paid by firm to partner – Assessment year 2014-15

1- Assessee filed its return of income in which it had claimed remuneration to partners, however, Assessing Officer noted that there was no remuneration clause in Partnership Deed

2 – Thus, revenue authorities rejected claim of assessee by holding that assessee had not satisfied requirement of section 40(b)(v) and conditions laid down in CBDT Circular No. 739, dated 25-3-1996

3 – It was also held that since quantum of remuneration had not been stated in partnership deed, which was mandatory condition, therefore, disallowance was rightly made by Assessing Officer – Whether section 40(b)(v) does not lay down any condition of fixing remuneration or method of remuneration in partnership deed

– Held, yes

4 – Whether all that section 40(b)(v) provides is that in case payment of remuneration made to any working partner is in accordance with terms of partnership deed and does not exceed aggregate amount as laid down in subsequent portion of section, deduction is permissible

 5- Held, yes – Whether since Partnership Deed specifically provided that salary/remuneration was to be computed as per section 40(b)(v); thus, harmoniously interpreting provisions of section 40(b)(v) as well as clauses of partnership deed, claim of remuneration paid to partners was to be allowed

 – Held, yes