Remuneration paid to partners cannot be disallowed for want of registration of firm. There is no requirement that partnership firm should be registered under the Partnership Act.
ABCAUS Case Law Citation:
ABCAUS 3136 (2019) (09) ITAT
The appeal of the assessee was directed against the order of the Commissioner of Income-tax (Appeals) in confirming the disallowance of remuneration paid to the Partners of the firm.
The appellant assessee was a Partnership Firm. The assessment of the firm was completed by the Assessing Officer (AO), u/s 143(3) of the Income Tax Act, 1961 (the Act) accepting the returned income.
Subsequently, the Assessing Officer based on the information that in the assessment completed, increased partner’s remuneration had been allowed despite the fact that supplementary partnership deed authorising the enhanced remuneration had not been registered. As per section 40(b) of the Act, only the amount authorized by the partnership deed is allowable as deduction towards remuneration paid by a firm to its working partner. Hence, the AO was of the view that in view of the excess remuneration allowed the income had escaped assessment to tax.
Accordingly the AO re-opened the assessment by issue of notice u/s.148 of the Act. In response to notice u/s.148, no return of income was filed and the assessment was completed after issuing notice u/s. 143(2) of the Act vide order passed u/s 143(3) r.w.s. 147 of the Act after making additions inter alia on account of excess remuneration paid to partners.
Aggrieved, the assessee preferred an appeal before the CIT(A), who vide the impugned order dismissed the appeal.
The Tribunal held that there is no requirement under the Act that the partnership firm should be duly registered under the Partnership Act. Therefore, remuneration paid to partners could not be disallowed for want of registration of firm.
Accordingly, the Tribunal directed the Assessing Officer to allow the remuneration paid to partners.
addition u/s 68 addition u/s 69A ca misconduct cash deposit in bank cbdt circular CBDT Instruction cbdt notification cbdt order cbdt press release cgst circular cgst notification cit revision 263 concealment penalty condonation of delay covid-19 custom circular demonetisation due date extension e-way bill faq GST circular GST Council Meeting gst faq gstn advisory GSTR-3B GST rates IBBI ibc icai announcement income tax penalty itat ITAT Delhi mca circular MCA notification penalty 271(1)(c) penalty u/s 271(1)(c) Press Release reasons recorded reopening 148 Reopening us 147 Search & Seizure sebi circular unexplained cash credits validity of notice u/s 148 Withdrawal of 2000 500 Bank Notes
Empanelment of General Observers for ICSI Examinations December 2026 ICSI has invited interested members to enroll as General Observers for…
ITAT answers some important and inter-related issues relating to deduction u/s 80IA In a recent judgment, ITAT has dealt with…
Carry forward of loss can not be denied for belated return, it is only the set off in subsequent year…
Where sales are duly recorded in books and VAT returns, to treat it bogus sales, AO must bringing cogent adverse…
Expenses to celebrate Diwali with staff creates a goodwill and, therefore amounts to expenses incurred for the purpose of business…
Section 292BB of the Income Tax Act, 1961 does not preclude Assessee raising objection for non issuance of notice u/s…