- (1.) Income-Tax Appeal No. 113 of 2010 is in respect of the assessment year 2005-06 and Income-tax Appeal No. 112 of 2010 is in respect of the assessment year 2006-07. These are appeals by the Revenue against the orders of the Income-tax Appellate Tribunal. They had framed several questions. In our opinion, questions Nos. 3, 4 and 5 are purely questions of fact and considering the concurrent findings recorded by the Commissioner of Income-tax (Appeals) as also the Income-tax Appellate Tribunal and questions Nos. 3, 4 and 5 as framed, no substantial question of law arises therein and, consequently, those questions do not arise. In so far as questions Nos. 1 and 2 are concerned, in our opinion, question No. 1 will cover both the questions and the appeals are admitted on the said question, which reads as under in both the appeals : 1. Whether the learned Income-tax Appellate Tribunal has erred in law and in facts in ignoring the conditions laid down in the provisions of section 40(b)(i) of the Income-tax Act, 1961, and Explanation 4 thereto with regard to the disallowance of salary paid to partners in the Hindu undivided family capacity.
(2.) The assessee is a partnership firm. The assessee has been paying salaries to their working partners, Sri Ambuj Rastogi and Sri Raj Kishore Rastogi, who are partners in the firm in their capacity as karta's of these respondents-Hindu undivided family.
(3.) The Assessing Officer noticed that the aforesaid two partners were working in the assessee-firm as individuals and that no services were being rendered to the firm by the Hindu undivided families. Further, no employer and employee relationship was established between the firm and the above Hindu undivided families and deduction of salary, as such, in terms of the Income-tax Act, 1961 (in short "the Act"), is allowable only when employer and employee relation-ship is established and, therefore, disallowed the salary paid to the aforesaid two partners.;