COMMISSIONER OF INCOME TAX Vs. PACKWELL KARNATAKA INDUSTRIES

JUDGEMENT

(1.) THE assessment year in this case is 1982-83. THE question referred is as to whether the Tribunal was right in holding that the remuneration paid by the assessee firm to one of it's partners who was a partner in his capacity as karta of Hindu Undivided Family was not taxable in computing the total income of the assessee firm and that the provisions of Section 40 (b) of the Income-tax Act are not attracted.

(2.) THE amount that was disallowed was paid to one of the partners as a technical consultation fee. Though the assessing officer and the appellate authority did not regard that payment as falling outside the description contained in Section 40 (b), the Tribunal accepted the assessee's appeal and held that that payment was a permissible deduction. Learned counsel for the assessee submitted that a partner in a firm can have more than one role to play and that he can, if he is a person possessed of expertise, make available such expertise to the firm for consideration and that consideration so received by him would be consideration received by an expert and not by a partner. In support of his submission, he placed reliance on a decision of this Court in the case of Commissioner of Income Tax v. Surendra Manilal Mehta (154 ITR 264).

(3.) IT was further held by the Court that a contract of partnership has no concern with the obligation of the partner to others in respect of their shares of profit in the partnership and that Section 40 (b) will apply even if the partner joined the firm as a nominee of a Hindu Undivided Family.