Opinion Of Eminent Legal Luminaries On Controversial Issues

Whether Remuneration To HUF Partner Is Allowable?

QUERY: A HUF is a partner in partnership firm in capacity of HUF, whether remuneration is allowable for deduction u/s. 40(b) of the Income-tax Act, 1961 in the hands of partnership firm?
ANSWER: No remuneration is allowable to HUF. Remuneration can be paid to Karta of the HUF, if he is a working partner in his individual capacity.

The Supreme Court in CIT vs. Trilok Nath Mehrotra & Others [231 ITR 278] has held as under:

“If a member of a Hindu Undivided Family joins a partnership and he is given a salary for managing the firm or rendering special services to the firm, the salary will be his individual income. But if his salary is really a part of the return for the investments made by the Hindu Undivided Family in the partnership firm, the salary income would be added to the income of the Hindu Undivided Family."

Further, the Madras High Court in CIT vs. Golden Touch [263 ITR 261] has observed that:

“The remuneration paid to the individual partners who are working partners is not to be disallowed on the sole ground that such partners were nominees of their Hindu Undivided Families. Even as the Hindu Undivided Family cannot claim that remuneration paid to partners representing it is remuneration paid to the Hindu Undivided Family, so also the Assessing Officer cannot regard the remuneration paid to such partner, who is also working partner, as remuneration paid to Hindu Undivided Family for the purpose of for the purpose of disallowance u/s. 40(b) of the Income- tax Act, 1961."

Posted in Income-tax
One comment on “Whether Remuneration To HUF Partner Is Allowable?
  1. Ravi says:

    Dear Sir, I case when both the HUF and His karta is an partner of same partnership firm then remuneration paid to HUF will be allowed or not ?

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