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partnership deed and relates to any period falling after the date of such partnership deed in so far as the amount of such payment to all the partners during the previous year exceeds the aggregate amount computed as hereunder : (a) On the first Rs. 3,00,000 of the book profit or in case of a loss Rs. 1,50,000 or at the rate of 90 per cent. of the book profit, whichever is more ; (b) On the balance of the book profit At the rate of 60 per cent. :
From the above provision, it can be seen that where an assessee is a partnership firm, any payment of salary, bonus, commission or remuneration to its partners under certain circumstances, if it exceeds the limits set out in clause B, deduction to the extent of excess cannot be claimed. In the present case, such ceiling is prescribed in two slabs. On the first Rs. 30 lakhs on the book profit or in case of loss such ceiling is Rs. 1,50,000 or 90 per cent. of the book profit, which ever is more. On the balance of the book profit such ceiling prescribed is at 60 per cent.
The question, therefore, arises whether the interest income earned by the assessee-firm from the fixed deposit receipts should be ignored for the purpose of working out the book profit to ascertain the ceiling of the partners' remuneration.
The Tribunal has proceeded on the basis that for the purpose of ascertaining such ceiling on the basis of book profit, the profit shall be in the profit and loss account and is not to be classified in the different heads of income under section 40 of the Act. The interest income, therefore, cannot be excluded for the purposes of determining the allowable deduction of remuneration paid to the partners under section 40b of the Act.