COMMISSIONER OF INCOME TAX Vs. UNIMAX LABORATORIES

JUDGEMENT

(1.) THE short question which permeates this reference is whether s. 40(b) of the IT Act, 1961 (for brevity, 'the Act') is applicable to the amount of salary and bonus paid by the assessee firm to its partners for their individual service as against their HUF character. It is at the instance of the Revenue that the Income -tax Appellate Tribunal Chandigarh Bench, Chandigarh (for brevity, 'the Tribunal') has referred the following question of law, which is stated to have question of law referred reads as under :

(2.) BRIEF facts of the case which are necessary for disposal of this case are that the AO made an addition of Rs. 62,015 under s. 40(b) of the Act on account of salary and bonus paid by the assessee firm to its four working partners. Those partners were partners in their representative capacity as Karta of the HUF. Since these partners represented their respective HUFs, they were treated to be partners for the purpose of disallowance of benefits under s. 40(b) of the Act by the AO. However, on appeal the addition of Rs. 62,015 was deleted on the ground that the salary and bonus were paid to these persons as individual and in these circumstances s. 40(b) of the Act has no application. The amount received by them was not assessed in the hands of the HUF. The assessee had pleaded that these persons rendered personal services to the firm because they had technical qualification and expertise. It was in lieu of rendering of personal services by them that the salary and bonus were claimed to have been paid.

(3.) THE Revenue felt aggrieved by the order passed by the CIT(A) and preferred an appeal before the Tribunal. The