Commissioner of Income Tax vs Manalal N. Chokshi

K.A. Puj, J.—At the instance of the revenue, following question of law is referred to this Court for its opinion for the assessment year 1988-89.

"Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the salary payment of Rs. 20,000 made to one of the partners in his individual capacity is not disallowable u/s 40(b) of the income tax Act?"

Heard Mr. Tanvish Bhatt, the learned Standing counsel appearing for the appellant - revenue and Mr. K.H. Kaji, learned counsel appearing for the respondent - assessee.

At the time of hearing of this reference, it is pointed out by Mr. Bhatt that issue involved in the present case is squarely covered by the decision of this Court in the case of National Wire Manufacturing Co. Vs. Commissioner of Income Tax, wherein this Court has taken the view that remuneration in the form of salary paid to the two individuals was disallowable u/s 40(b) of the Act, even though they were partners as kartas of HUF in the firm.

Following the aforesaid decision, we are of the view that the Tribunal was not right in holding that the salary payment of Rs. 20,000 made to one of the partners in individual capacity is not disallowable u/s 40(b) of the income tax Act. We, therefore, answer the above question in negative i.e., in favour of revenue and against the assessee.

The reference is accordingly disposed of.