Case Law Details
JRA & Associates Vs ACIT (ITAT Delhi)
After perusal of the partnership deed in the assessee’s case it can be seen that the CBDT Circular in Clause 4 has categorically mentioned that even the method of quantification can be accepted as per the provisions of Section 40(b) (v) of the Act.
Besides that the Hon’ble Delhi High Court in case of CIT Vs. Vaish Associates has also given the finding that when the remuneration is quantified through method of prescribed under the Provisions of Section 40(b) (v) then the remuneration has to be allowed by the Assessing Officer.
The assessee also relied upon the decision of the Delhi Tribunal in case of ACIT Vs. M/s DCS International Trading wherein the similar clause which is incorporated in a present partnership deed has been discussed and taken into consideration. The Tribunal has also considered the decision of the Hon’ble Delhi High Court in case of Sood Brij & Associates. In-fact, in the present case also, this decision will not be applicable as in that case. In Sood Brij & Associates though the partners were equally distributing the remuneration yet it was on the terms of mutual agreement of the partners which might have element of uncertainty of the remuneration. There was no method given in the partnership deed in that particular case. Therefore, the Hon’ble Delhi High Court decision in case of Sood Brij & Associated will not be applicable in the present case.
In the present case, the Hon’ble Delhi High Court’s decision dated 11.08.2015 in case of Vaish Associates will be applicable. The Clause mentioned in Vaish Associates case is in toto similar in the present case for partnership deed relating to remuneration of the partners. Therefore, in light of this the CIT(A) as well as the Assessing Officer has not taken a proper cognizance of the Clauses given under the partnership deed in consonance with the provisions of Section 40(b) (v) of the Act. Therefore, we set aside the order of the CIT(A). The appeal of the assessee is allowed.
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