The Income Tax Appellate Tribunal (ITAT), Kolkata bench has held that the income tax law does not prohibit a partner from drawing remuneration/ salary from more than one partnership firm.
During the course of the assessment proceedings, the Assessing Officer disallowed the remuneration/ commission paid to two women partners who also derived remuneration from another firm viz. M/s Lal Fashion.
On appeal, the CIT(A) partially sustained the original order. The authorities were of the view that they did not believe that the two lady partners could simultaneously work for two partnerships and draw remuneration/commission.
The Tribunal noted that both the firms were engaged in a similar business and that Smt. Angura Devi Agarwal& Smt. Bina Agarwal was active and working partners have not been denied by the Ld. CIT(A) in as much as the remuneration paid to these two ladies was allowed as a business expenditure by the Ld. CIT(A) while disposing of the appeal of M/s Lal Fashion.
The Tribunal found that the CIT(A) per se has not disputed or disbelieved the fact that the said two lady partners are working partners and they have working knowledge of the business in which the assessee firm was engaged.
“I, therefore, find that there was no material for the authorities below to doubt the capacity of the lady partners to render services for carrying on assessee’s business, which was intimately connected with selling sarees&salwar suits,” the Tribunal said.
“However there is no law which prohibits a person to work in more than one partnership firms and draw remuneration therefrom. All that Section 40(b) requires is that the remuneration should be paid to a working partner and there is no prohibition either in the Income-tax Act, 1961 or the Indian Partnership Act, 1932 debarring a partner to draw remuneration from more than one partnership firms. In the circumstances, I do not find any reason to uphold the disallowance merely because two working partners of the assessee firm were also working partners of another firm namely M/s Lal Fashion and in that capacity derived remuneration from two firms. The disallowance of commission/remuneration paid to Smt. Angura Devi Agarwal& Smt. Bina Agarwal is therefore deleted,” the Tribunal said.
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