Case Law Details
Shreeji Corporation Vs JCIT (ITAT Ahmedabad)
The issue under consideration is whether remuneration paid to a partner acting in a representative capacity as karta of HUF is allowed u/s 40(b)?
ITAT states that the expression ‘person’ as defined in the Indian Income-tax Act as well as in the Excess Profits Tax Act, HUF is not juristic person for all purposes. When two kartas of two Hindu undivided families enter into a partnership agreement the partnership is popularly described as one between the two Hindu undivided families hut in the eye of law it is partnership between the two kartas and the other members of the families do not ipso facto become partners. There is, however, nothing to prevent the individual members or one Hindu undivided family from entering into a partnership with the individual members of another Hindu undivided family and in such a case it is a partnership between the individual members and it is wholly inappropriate to describe such a partnership as one between two Hindu undivided families. This decision has been noted in the case of Van-son Kids Suff 83 ITD 268 wherein also the partner representing in HUF capacity was held to be a working partner in his individual capacity and the remuneration was allowed within the meaning of section 40(b) read with Explanation thereto. Further, ITAT states that salary paid to the partner who was partner in his representative capacity as karta of HUF cannot be considered to be payment to HUF but to karta as an individual. The karta of HUF is a working partner and, therefore, the remuneration paid to him is allowable. Respectfully following the aforesaid decisions, ITAT are of the opinion that the revenue authorities were not justified in disavowing the-claim of the assessee. The two partners though they were representatives of their respective HUFs were partners in their individual capacity and, therefore, the remuneration paid to them would be an allowable deduction. Accordingly, ITAT allow the claim of the assessee.
FULL TEXT OF THE ITAT JUDGEMENT
This assessee’s appeal for A.Y. 2011-12, arises from order of the CIT(A)-7, Ahmedabad dated 30-11-2015, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
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