Govind Kumar Vs ACIT (Karnataka High Court)
Partner’s Remuneration Cannot Be Taxed Ignoring s.28(v) r/w s.40(b); Karnataka HC Sets Aside Assessment for Non-Consideration of Statutory Provisions
The Karnataka High Court, in Govind Kumar vs. ACIT, Central Circle-1(1) & Anr. (W.P. No. 10759 of 2025, order dated 01-Dec-2025), set aside the assessment order u/s 143(3), consequential demand notice u/s 156, and penalty notice u/s 274 r/w s.270A for AY 2023-24, holding that the Assessing Officer failed to properly consider the statutory scheme of s.28(v) r/w s.40(b) while taxing partner’s remuneration.
The Court noted that although the Assessing Officer had recorded the Assessee’s specific contention—that remuneration received from an LLP, already subjected to disallowance at the firm level u/s 40(b), cannot again be taxed in the partner’s hands leading to double taxation—the impugned order did not examine or apply these provisions while finalising the assessment. Such non-consideration of relevant statutory provisions was held to vitiate the assessment.
Accordingly, the matter was remanded for fresh consideration, with directions to afford reasonable opportunity to the Assessee and to decide the issue in accordance with law, specifically bearing in mind s.28(v) read with s.40(b). Liberty was reserved to the Assessee to file additional pleadings and documents.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
