COMMISSIONER OF INCOME TAX Vs. ANIL HARDWARE STORE

JUDGEMENT

(1.) THIS appeal has been admitted on the following two substantial questions of law:

(2.) IT would be pertinent to mention that for the earlier assessment years 1993 -94 to 1996 -97, the Board took a lenient view of the matter and decided that keeping in view the ambiguity in the language of the Section even if the remuneration was not fixed in the partnership deed, the firm shall be entitled to deduct the amount payable under Section 40(b)(v). However, for the assessment year 1996 -97 and subsequent thereto, it was clearly laid down that unless the partnership deed specified the amount of remuneration payable to each individual working partner or lays down the manner of quantifying such remuneration, the benefit of Section 40(b)(v) would not be available to the assessee Firm.

(3.) THE only question which arises for consideration is whether the aforesaid Clauses 5 and 7 lay down the method for fixing the remuneration of individual partners in terms of Clause 4 of the CBDT circular No. 739 dated 25.3.1996. A bare perusal of the partnership deed clearly shows that in case the book profits are upto Rs. 75,000/ -, then the partners would be entitled to remuneration upto Rs. 50,000/ - or 90% of the book profits, whichever is more. In respect of the next Rs. 75,000/ - , it is 60% and for the balance book profits, it is 40%.