S. 40(b)(v): Partnership deed need not quantify partner’s remuneration

CIT vs. M/s. The Asian Marketing (Rajasthan High Court)

S. 40(b)(v): Partnership deed need not quantify partner’s remuneration

The assessee’s partnership deed provided that the partners would be paid remuneration / salary “according to the standards and norms fixed by the relevant provisions of the Income Tax Act, 1961”. The AO disallowed the claim for deduction of the salary paid to the partners u/s 40(b)(v) on the ground that as the deed did not quantify the amount of remuneration. This was reversed by the CIT (A) and Tribunal. On appeal by the department, HELD dismissing the appeal:

The Tribunal finding that “The quantification of the remuneration was apparent from clause 8 of the partnership deed which provided that the remuneration would be payable as per norms fixed by the Income-tax Act. The requirement in law is that remuneration should have been authorized and the amount of remuneration shall not exceed the amount specified in s. 40(b)(v) which uses the word ‘authorised‘ and not the word ‘quantify‘” is a finding of fact which cannot be interfered with by this Court.