- (1.) The Income-tax Appellate Tribunal, Delhi, has referred the following question of law under Section 256(2) of the Income-tax Act, 1961 (herein after referred to as "the Act"), for opinion to this Court : "Whether remuneration paid as business adviser to a partner of the firm is covered under the provisions of Section 40(b) or not ?"
(2.) Briefly stated the facts giving rise to the present reference are as under :
(3.) The. reference relates to the assessment year 1984-85. The respondent-assessee is a registered partnership firm. It had entered into an agreement some time in January 1973, with M/s. Co-operative Co. Limited, Nawab-ganj, Saharanpur, wherein the respondent undertook to carry on business earlier carried on by the same company on certain terms and conditions.The business consists of manufacturing and sale of different brands of liquors. Some of the terms of the agreement are reproduced below : "(i) The properties owned by the said company will continue to be the property of the company but the assessee could install and purchase new plant and machinery, etc., which could be taken back by the assessee on the expiry of the agreement; (ii) For the purpose of business, necessary finance would be provided only by the assessee and the profit and loss of the business would belong to the assessee. The assessee was required to bear all the expenses including, director's remuneration payable by the company; (iii) The assessee would not dismiss any employees of the company and new employees could be appointed on recommendation by the assessee; (iv) The assessee shall pay a sum of Rs. 60,000 per year on which the assessee-company shall pay its own income-tax.";