Case Law Details
Luthra & Luthra LLP Vs ACIT (ITAT Delhi)
ITAT Delhi held that total allowance of the remuneration (including bonus) to the partners has to be within the permissible limit of provisions of section 40(b) of the Income Tax Act.
Facts- The return of income of the assessee was taken up for scrutiny assessment u/s. 143(3) of the Income Tax Act, 1961 and the assessment was framed vide order dated 02.12.2016. AO made disallowance out of salary to partners u/s. 40(b) of the Act in respect of bonus paid to the partners amounting to Rs. 15,47,500/-.
Aggrieved against this, the assessee preferred appeal before the CIT(A), who after considering the submissions and material available on record, dismissed the appeal of the assessee. Being aggrieved, the present appeal has been preferred.
Conclusion- We find that Co-ordinate Bench of Tribunal in assessee’s own case has held that total allowance of the remuneration to partners has to be judged in the light of the provisions contained section 40(b) of the Income Tax Act. The AO is directed to verify whether the overall remuneration including bonus is within the permissible limit of the relevant provisions of section 40(b) of the Income Tax Act and if found so the same should be allowed.
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