Section 28(v) — the law in short
What the courts have decided on section 28(v), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Mr. Anandkumar v ACIT
High CourtHelps department
I am a partner. Can I take the salary and interest my firm pays me, call it my turnover, and offer 8 per cent of it under s.44AD?
No. The High Court held that a partner receiving remuneration and interest from his firm is not himself carrying on a business, so those receipts cannot be termed a turnover, and they do not qualify as gross receipts either. Section 44AD applies only to an eligible assessee engaged in an eligible business having a total turnover or gross receipts, and the assessee here had neither effected sales nor rendered services; the sums had already been debited in the firms' own profit and loss accounts. The appeal was dismissed and both questions of law were answered against the assessee and in favour of the Revenue. This is the answer to a scheme that is still marketed to partners, and it is a High Court answer, not a Tribunal one.
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Rameshchandra Balachand v JCIT (OSD)
ITATHelps taxpayerValidity unconfirmed
The officer says my partner is a sleeping partner because she is not in the office every day. Can he disallow her remuneration?
No, on these facts — but the case is decided on a wider ground first. For five of the seven years the disallowance fell on jurisdiction: those years were unabated when the search took place, and a statement recorded under s.132(4) is not incriminating material capable of supporting an addition under s.153A. On the merits, taken in the alternative and carrying the remaining two years, the Tribunal held that not attending the office daily does not make a partner a sleeping partner where the work she did was proved, and noted that the remuneration was taxed in her hands under s.28(v). The disallowance was made under s.37 as expenditure not for the purposes of the business, not under s.40(b).
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.