By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Chartered Accountants
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New Page 1
54 (2009) 34 SOT 495 (Pune)
Asst.CIT vs Suman Construction
A.Ys.:1999-2000 and 2000-01.
Date of order: 31.12.2008.
Section 40(b) — Since section 40(b) uses the term “authorise”
and not “quantify”, salary to partners cannot be disallowed merely because
amount of salary is not quantified in partnership deed.
Section 119 — CBDT has no jurisdiction to substitute the term
“authorise” occurring in section 40(b) by the term “quantify” in its Circular
No.739, dated 25.03.1996.
Facts:
The salary paid to partners by the assessee firm for A.Ys.
1999-2000 and 2000-2001 was disallowed by the Assessing Officer on the ground
that in the partnership deed filed along with the return of income for
A.Y.1998-99, neither the salary payable to the partners was quantified nor the
manner in which such quantification had to be done was prescribed. By referring
to the CBDT Circular No.739, dated 25.03.1996 [1996] 131 CTR (St.) 53, the
Assessing Officer was of the view that since there was no specified
quantification, the assessee was not entitled to deduction u/s.40(b) in respect
of the salary.
The CIT(A) held that the assessee was entitled to claim the
deduction for remuneration paid to the partners since the payment of salary to
the four partners was authorised by the partnership deed.
Held:
The Tribunal, upholding the CIT(A)’s order, noted as follows:
1. On reading this section it becomes clear that it does
not make it mandatory to quantify the amount of salary in one of the clauses
of the partnership deed, mainly because of the reason that the monetary limit
or ceiling is otherwise prescribed in the statute itself. The statute has used
the term “authorise” and not the term “quantify”.
2. In respect of the CBDT Circular No.739
(supra) relied upon by the Assessing Officer, the Tribunal clarified that the
CBDT cannot issue a circular u/s 119 which tantamounts to detracting from the
provisions of the Act. While interpreting the clause of a statute, there is no
scope for importing into the statute some other words which are not there or
to exclude words which are there.
3. It was also not a case that the impugned taxing
provisions were ambiguous and, therefore, capable of more than one
interpretation. Since there was no ambiguity, there was no question of a
beneficial interpretation to either side. Therefore, the words contained in
the provision must be given a natural meaning as commonly understood in the
legal parlance.
