Profit From Sale of Depreciable Shop Premises Must Be Retained

Profit From Sale of Depreciable Shop Premises Must Be Retained in Book Profit for Section 40(b) Partner Remuneration

Issue

Whether the profit earned from the sale of a depreciable business shop, credited to the Profit and Loss Account and assessable under Section 50 as short-term capital gains, can be excluded by the Assessing Officer when computing “book profit” for allowable partners’ remuneration under Explanation 3 to Section 40(b) of the Income-tax Act, 1961.

Facts

Business & Sale of Asset: The assessee, a partnership firm, sold a shop premises used for its business during Assessment Year 2016–17.
Accounting Treatment: The shop was a depreciable asset with an opening Written Down Value (WDV) of Re. 1.00. The firm credited the net profit of ₹1.15 crores on the sale of the asset directly to its Profit and Loss Account.
Remuneration Claim: Based on the book profits computed after including the ₹1.15 crore sale profit, the assessee claimed partners’ remuneration of ₹99.03 lakh under Section 40(b)(v).
AO’s Disallowance: The Assessing Officer (AO) excluded the ₹1.15 crore profit from “book profit” on the ground that it was assessable as short-term capital gains under Section 50, resulting in a excess remuneration disallowance of ₹66.59 lakh.
Inconsistent Approach: While excluding the capital gain profit, the AO retained other non-business receipts (such as rent, dividend, and interest) that were credited to the same Profit and Loss Account.

Decision

Definition of Book Profit: Explanation 3 to Section 40(b) defines “book profit” with reference to the net profit shown in the Profit and Loss Account, and does not mandate the exclusion of receipts assessable under heads of income other than business income.
Scope of Chapter IV-D Mandate: The phrase “computed in the manner laid down in Chapter IV-D” in Explanation 3 refers only to standard statutory adjustments required under business income provisions, not a strict head-wise filtering under Section 14.
Strict Scope of Section 50: The deeming fiction created under Section 50 is strictly confined to the computation of capital gains and cannot be extended to alter or adjust commercial book profits under Explanation 3 to Section 40(b).
Selective Disallowance Invalid: The AO’s selective exclusion of the sale profit while retaining rent, interest, and dividend in the Profit and Loss Account was internally inconsistent and legally unsustainable.
Final Ruling: The profit of ₹1.15 crores was required to be retained in computing “book profit” for Section 40(b). Consequently, the total partners’ remuneration claim of ₹99.03 lakh was held fully allowable, and the disallowance made by the AO was deleted in favour of the assessee.

Key Takeaways

P&L Net Profit Controls Book Profit: Book profit for partners’ remuneration under Section 40(b) relies on commercial net profit as per the P&L Account, unless specific statutory adjustments under Chapter IV-D apply.
No Implication of Head-Wise Exclusion: Receipts credited to the P&L Account are not automatically excluded from Section 40(b) book profit merely because they are taxed under other heads of income (e.g., Capital Gains, House Property, or Other Sources).
Deeming Fictions Are Restricted: Special deeming provisions like Section 50 apply strictly to calculating short-term capital gains and cannot be imported into separate statutory computations like Section 40(b).

IN THE ITAT MUMBAI BENCH ‘F’

Sanjay Distributors

Deputy Commissioner of Income-tax

Amit Shukla, Judicial Member
and MAKARAND VASANT MAHADEOKAR, Accountant Member

IT Appeal No. 4465 (Mum) of 2026
[Assessment year 2016-17]

SEPTEMBER 2, 2026

Vijay Kewal Ramani for the Appellant. Sanjay Yadav, Sr. DR for the Respondent.

ORDER

Makarand Vasant Mahadeokar, Accountant Member. – This appeal by the assessee is directed against the order dated 06.03.2026 passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [“CIT(A)”], under section 250 of the Income-tax Act, 1961 [“the Act”] for the assessment year 2016-17. The assessee has called into question the confirmation of disallowance of partners’ remuneration amounting to Rs.66,58,979/- made by the Assessing Officer under section 40(b) of the Act.

Facts of the Case

2. The material facts emerging from the orders of the authorities below are that the assessee is a resident partnership firm engaged in the business of distribution of FMCG products of M/s J.K. Ansel Limited. The assessee follows the mercantile system of accounting. For the assessment year under consideration, it electronically filed its return of income on 16.09.2016 declaring a total income of Rs.63,35,286/-.The return was selected for scrutiny through CASS.

3. During the relevant previous year, the assessee disclosed a book profit of Rs.1,67,55,910/- on a turnover of Rs.30,53,98,623/-, before deduction of remuneration payable to its partners. The aforesaid book profit included profit of Rs.1,14,99,999/- arising from the sale of shop premises situated at B/3, Suyog Row House, Mulund. The shop was sold under a sale deed dated 26.03.2016 for a consideration of Rs.1,15,00,000/-.The shop premises was a depreciable asset of the assessee firm and formed part of its block of assets. Its written down value at the beginning of the relevant previous year was stated to be Rs.1/-. The assessee credited the resulting profit of Rs.1,14,99,999/- to its Profit and Loss Account and included the same while computing the book profit for the purpose of determining the remuneration payable to its working partners.

4. The Assessing Officer was of the view that, since the shop was a depreciable asset, the gain arising from its transfer was required to be treated as short-term capital gain under section 50 of the Act. He accordingly required the assessee to show cause why the amount of Rs.1,14,99,999/- should not be excluded from the book profit for computing the maximum permissible remuneration under section 40(b)(v).

5. The Assessing Officer reduced the profit on the sale of the shop premises amounting to Rs.1,14,99,999/- from the book profit of Rs.1,67,55,910/- and consequently determined the book profit at Rs.52,55,911/-. Applying the limits contained in section 40(b)(v), he computed the permissible remuneration as follows:

–

On the first Rs.3,00,000/- at 90 per cent: Rs.2,70,000/-

–

On the balance book profit of Rs.49,55,911/- at 60 per cent: Rs.29,73,546/

–

Total permissible remuneration: Rs.32,43,546/-

6. Before the Assessing Officer, the assessee contended that although the gain might be assessable under a different head of income by virtue of section 50, the profit stood credited to the Profit and Loss Account and formed part of its disclosed net profit. It was also contended that the partners had offered the remuneration received from the assessee firm to tax in their respective returns of income and, therefore, the transaction was revenue neutral.

7. The Assessing Officer did not accept the explanation. According to him, section 50 required the gain on the transfer of the depreciable asset to be treated as short-term capital gain and, therefore, the said gain could not form part of the book profit for computing the ceiling of remuneration under section 40(b)(v). He also rejected the plea of revenue neutrality on the ground that the assessee firm and its partners were separate taxable entities and that payment of tax by the partners did not permit the firm to claim remuneration exceeding the statutory ceiling.

8. The Assessing Officer accordingly restricted the allowable remuneration to Rs.32,43,546/- and disallowed the balance amount of Rs.66,58,979/-. The assessment was completed under section 143(3) of the Act by order dated 07.12.2018. Penalty proceedings under section 271(1)(c) were also separately initiated.

9. Aggrieved by the assessment order, the assessee instituted an appeal before the CIT(A) on 04.01.2019. It was contended that “book profit”, as defined in Explanation 3 to section 40(b), commenced with the net profit disclosed in the Profit and Loss Account and that there was no specific provision requiring exclusion of capital gains or segregation of operational and non-operational income. The profit on the sale of the shop premises had been credited to the Profit and Loss Account, was reflected in the audited financial statements, and formed part of the commercial profit of the firm.

10. The assessee further submitted before the CIT(A) that section 50 only prescribed the manner in which gain arising from the transfer of a depreciable asset was to be computed and assessed. It did not alter the commercial character of the profit credited to the Profit and Loss Account or require its exclusion from book profit under section 40(b). The assessee also reiterated that the remuneration was authorised by the partnership deed, had actually been paid, and had been offered to tax by the partners in their individual returns.

11. The CIT(A) rejected the contentions of the assessee. He held that Explanation 3 to section 40(b) required book profit to be computed in the manner laid down in Chapter IV-D and, therefore, the net profit disclosed in the Profit and Loss Account could not be adopted mechanically. Since the shop premises formed part of the block of depreciable assets, the CIT(A) held that, by virtue of section 50, the surplus arising from its transfer was chargeable under the head “Capital Gains” and not as business income.

12. The CIT(A) further held that capital gains credited to the Profit and Loss Account did not partake of the character of business profits for computing the permissible remuneration under section 40(b). According to him, including such capital gain in the book profit would artificially increase the statutory ceiling. The plea of revenue neutrality was also rejected on the ground that the allowability of expenditure had to be decided strictly in accordance with the provisions of the Act and not with reference to the incidence of tax in the hands of the partners. The CIT(A), therefore, confirmed the disallowance of Rs.66,58,979/-and dismissed the appeal.

13. Aggrieved by the order of learned CIT(A), the assessee is in appeal before us. The assessee has raised the following grounds of appeal:

The Ld. CIT(A) erred in law and on facts in confirming the disallowance and denying the deduction of remuneration of Rs. 99,02,526/- paid to partners calculated as per book profits of the assessee, and the same may kindly be deleted.

The Ld. CIT(A) erred in law and on facts in failing to consider the profit on sale of asset amounting to Rs. 1,14,99,999/- for the purpose of calculating book profit for arriving at the allowable remuneration payable to partners, and the same may kindly be considered and the full remuneration of Rs. 99,02,526/- as claimed by the appellant including the proposed disallowance of Rs. 66,58,979/- be allowed in full.

The Ld. CIT(A) erred in law and on facts in failing to appreciate the aspect of revenue neutrality while confirming the addition towards remuneration disallowance, kindly be deleted.

The Ld. CIT(A) erred in law and on facts in failing to appreciate that the disallowance of remuneration of Rs. 66,58,979/- results in double taxation, as the partners had already offered the said remuneration as income in their individual years and paid taxes thereon, and the same may kindly be deleted.

The appellant craves leave to add, amend, alter and/or withdraw all or any of the aforesaid grounds of appeal.

14. Before us, the learned Authorised Representative (AR) submitted that Ground Nos. 1 and 2 involved the interpretation of the expression “book profit” as defined in Explanation 3 to section 40(b). It was submitted that the provision adopts the net profit disclosed in the Profit and Loss Account as its starting point and does not contemplate reconstruction of that profit by excluding every item which may separately be assessable under a different head of income.

15. The learned AR submitted that the profit of Rs.1,14,99,999/- arose from the sale of the assessee’s own shop premises, which was used in its distribution business and formed part of the block of business assets. The resulting profit was admittedly credited to the audited Profit and Loss Account. The learned AR invited our attention to the profit and loss account placed on paper book page No. 56. The learned AR further submitted that Section 50 merely deemed the resultant gain to be short-term capital gain for the limited purpose of computing and taxing the capital gain. It neither altered the commercial profit disclosed in the books nor governed the computation of book profit for the distinct purpose of section 40(b).

16. The learned AR emphasised that the Assessing Officer had not disputed that the amount of Rs.1,14,99,999/- stood credited to the audited Profit and Loss Account or that the book profit disclosed by the assessee was Rs.1,67,55,910/-. The entire disallowance proceeded only on the premise that the amount treated as short-term capital gain under section 50 had to be excluded before applying the limits under section 40(b)(v). According to the learned AR, such an exclusion was not contained in Explanation 3.

17. As regards Ground Nos. 3 and 4, the learned AR submitted, without prejudice, that the disallowance resulted in double taxation of the same amount. The remuneration was computed according to the partnership deed, actually paid to the partners, and offered to tax by them in their respective returns for the same assessment year. The claim was fully disclosed in the audited financial statements, the tax audit report in Form 3CD, and the computation of income accompanying the return.

18. The learned Departmental Representative, on the other hand, relied upon the orders of the authorities below and supported the disallowance of Rs.66,58,979/- sustained by the CIT(A).

19. We have considered the rival submissions and carefully perused the orders of the authorities below, the computation of total income, the audited Trading, Profit and Loss Account and the judicial precedents relied upon. The controversy before us is whether the profit of Rs.1,14,99,999/- arising from the sale of the assessee’s depreciable shop premises, which was admittedly credited to its Profit and Loss Account, could be excluded while determining the “book profit” for computing the permissible remuneration payable to the working partners under section 40(b)(v) of the Act.

20. For the assessment year under consideration, section 40(b)(v) permits deduction of remuneration paid to working partners, subject to the prescribed monetary limits. On the first Rs.3,00,000/- of the book profit, or in the case of a loss, the permissible amount is Rs.1,50,000/- or 90 per cent of the book profit, whichever is higher. On the balance book profit, remuneration is permissible at the rate of 60 per cent. Explanation 3 to section 40(b) defines the expression “book profit” as under:

“For the purposes of this clause, ‘book-profit’ means the net profit, as shown in the profit and loss account for the relevant previous year, computed in the manner laid down in Chapter IV-D as increased by the aggregate amount of the remuneration paid or payable to all the partners of the firm if such amount has been deducted while computing the net profit.”

21. The statutory definition has three material components. First, the starting point is the net profit as shown in the Profit and Loss Account for the relevant previous year. Secondly, such net profit must be computed in the manner laid down in Chapter IV-D. Thirdly, where remuneration paid or payable to the partners has already been deducted while arriving at the net profit, the same is required to be added back. Significantly, the Legislature has not defined book profit to mean only the income assessed under the head “Profits and gains of business or profession”. Nor does Explanation 3 contain an express direction to exclude from the net profit every receipt which may ultimately be assessable under another head of income.

22. The words “computed in the manner laid down in Chapter IV-D” require such statutory adjustments as are contemplated while computing the profits of the firm. They do not substitute the head-wise computation of total income for the net profit disclosed in the Profit and Loss Account. If the Legislature had intended book profit to comprise only the income finally assessed under the head “Profits and gains of business or profession”, it could have employed those precise words. Instead, it consciously selected the wider expression “net profit, as shown in the profit and loss account”.

23. In the present case, the relevant facts are undisputed. The shop premises situated at B/3, Suyog Row House, Mulund, was owned by the assessee firm, was used for the purposes of its distribution business and formed part of its block of depreciable assets. The shop was sold on 26.03.2016 for Rs.1,15,00,000/-. Its written down value was stated to be Rs.1/-. The resulting profit of Rs.1,14,99,999/- was credited to the audited Trading, Profit and Loss Account. Neither the sale transaction nor the accounting entry has been doubted by the Assessing Officer. The amount was excluded by him solely because section 50 required the resultant gain to be assessed as short-term capital gain.

24. A perusal of the Trading, Profit and Loss Account for the year ended 31.03.2016, placed at page 56 of the paper book, shows that the assessee credited therein the gross profit of Rs.1,30,07,175.27 from its distribution business, fixed-deposit interest of Rs.3,26,541/-, dividend income of Rs.3,750/-, interest from others of Rs.81,235/-, rent received of Rs.3,88,000/- and profit on sale of the shop premises of Rs.1,14,99,999/-. After taking the aforesaid credits and the relevant expenses into account, the Profit and Loss Account disclosed a profit of Rs.1,67,55,910.90 before interest and remuneration payable to the partners.

25. The above Profit and Loss Account is of considerable significance. Dividend, interest and rental receipts may ordinarily be exempt or assessable under heads distinct from “Profits and gains of business or profession”. In fact, the assessee’s computation of total income separately placed the rent of Rs.3,88,000/- under the head “Income from house property” and, after deducting Rs.1,16,400/- towards repairs and collection charges, offered the net property income of Rs.2,71,600/- under that head. Nevertheless, the Assessing Officer did not object to the inclusion of the fixed-deposit interest, dividend, interest from others or rent received in the net profit disclosed in the Profit and Loss Account for the purpose of section 40(b). He selectively excluded only the profit on sale of the shop premises because section 50 classified the gain as short-term capital gain.

26. The treatment adopted by the Assessing Officer is internally inconsistent. If the head under which a receipt is ultimately assessed were the conclusive test for determining book profit under Explanation 3, the Assessing Officer would also have been required to examine and exclude the dividend, interest and rental receipts credited to the same Profit and Loss Account. No such exercise was undertaken. The selective exclusion of the profit on sale of the shop premises is neither supported by the language of Explanation 3 nor consistent with the treatment accorded by the Assessing Officer to the other credits appearing in the Profit and Loss Account.

27. There is also a material distinction between the computation of total income under the different heads specified in section 14 and the computation of book profit for determining the statutory ceiling under section 40(b)(v). While computing total income, the assessee removed the gross rent of Rs.3,88,000/- from the business computation and separately offered the net rental income of Rs.2,71,600/- under the head “Income from house property”. That head-wise adjustment was necessary for computing the assessee’s total income. It does not follow that the rent, which formed part of the commercial net profit disclosed in the Profit and Loss Account, must also be removed for determining book profit under Explanation 3. The two computations operate for different statutory purposes and cannot be conflated.

28. Section 50 does not alter this conclusion. It is a special provision which modifies the operation of sections 48 and 49 in the case of the transfer of depreciable assets. It provides that the resultant capital gain shall be treated as short-term capital gain for the purposes of sections 48 and 49. It does not provide that the commercial profit arising from such transfer must be removed from the net profit shown in the Profit and Loss Account while applying section 40(b).

29. The scope of the deeming fiction under section 50 was considered by the Hon’ble jurisdictional High Court in CIT v. ACE Builders (P.) Ltd. [2006] 281 ITR 210 (Bombay) and has concluded that “the fiction created under section 50 is confined to the computation of capital gains only and cannot be extended beyond that.” (para 25). This view was subsequently approved by the Hon’ble Supreme Court in CIT, Panji v. V.S. Dempo Company Ltd 387 ITR 354 (SC).

30. The principle emerging from the aforesaid binding authority is that the deeming fiction created under section 50 must remain confined to the purpose for which it was enacted. Therefore, while the gain of Rs.1,14,99,999/- is liable to be computed and assessed as short-term capital gain under section 50, the fiction cannot, in the absence of express statutory language, be carried into Explanation 3 to section 40(b) so as to remove an amount which admittedly forms part of the net profit shown in the Profit and Loss Account.

31. The meaning of “book profit” under Explanation 3 was considered by the Co-ordinate Bench in Suresh A. Shroff & Co. v. Jt. CIT 11 (3) 140 ITD 1 (Mumbai)/ITA No.4140/Mum/2008, order dated 29.08.2012. The Co-ordinate Bench held as under:

11.

The question before us as to whether for the purpose of computation of allowable remuneration to partners, the ‘book profit’ comprises the entire net profit as shown in the profit and loss account or only profit and gains of business assessed under Chapter IV-D of the Act.

12.

Under clause (v) of section 40(b) read with Explanation 3, the remuneration allowable to working partners upto Rs.50,000/- is fully allowable in the hands of the firm. In case the aggregate payment exceeds the limit of Rs.50,000/-, certain monetary limits have been prescribed under section 40(b)(v) in the form of a percentage of “book-profit”. For the purposes of this clause, according to Explanation 3, the ‘book-profit’ means the net profit (as shown in the profit and loss account for the relevant previous year, computed in the manner laid down in Chapter IVD) as increased by the aggregate amount of the remuneration paid or payable to all the partners of the firm if such amount has been deducted while computing the net profit. The said chapter nowhere provides that net profit should be the only income from business or profession alone and not fro mother sources. Section 29 provides how the income from profits and gains of business or profession should be computed and this has to be done as provided under Section 30 to 43D. Thus for the purpose of Section 40(b)(v)read with Explanation there cannot be separate method of accounting for ascertaining net profit and/or book-profit. In other words, according to the said Explanation ‘book profit’ means the net profit as shown in the profit and loss account including income from other sources not the profit computed under the head profit and gains of business or profession.

32. The Co-ordinate Bench consequently held that income credited to the Profit and Loss Account could not be discarded merely because it was assessed under another head. The Coordinate Bench in Suresh A. Shroff & Co. (supra) also followed the judgment of the Hon’ble Calcutta High Court in Md. Serajuddin & Bros. v. CIT (Calcutta), wherein the relevant statutory principle was stated thus:

“The said chapter nowhere provides that method of accounting for the purpose of ascertaining net profit should be the only income from business alone”

33. The facts of the present case stand on an even stronger footing. The impugned profit did not arise from an unrelated or independent investment. It arose from the transfer of the assessee’s own shop premises, which was used for its distribution business and formed part of the block of its depreciable business assets. The gain retained its character as a commercial profit credited to the Profit and Loss Account, notwithstanding the limited statutory fiction under section 50 concerning its computation and assessment as short-term capital gain.

34. The returned-income computation also requires proper appreciation. The audited Profit and Loss Account disclosed profit of Rs.1,67,55,910.90 before deduction of interest and remuneration payable to the partners. The computation of income adopted the rounded figure of Rs.1,67,55,911/-. The allowable interest payable to the partners amounted to Rs.4,01,700/-. Since Explanation 3 requires an increase only in respect of remuneration deducted while computing the net profit, and not in respect of allowable interest payable to partners, the relevant book profit for determining the ceiling of remuneration works out to Rs.1,63,54,211/-, being Rs.1,67,55,911/- less Rs.4,01,700/-.

35. On the first Rs.3,00,000/- of the aforesaid book profit, the permissible remuneration at 90 per cent works out to Rs.2,70,000/-. On the balance book profit of Rs.1,60,54,211/-, remuneration at 60 per cent works out to Rs.96,32,526.60. Thus, the aggregate permissible remuneration under section 40(b)(v) works out to Rs.99,02,526.60. The remuneration of Rs.99,02,526/- claimed by the assessee is, therefore, within the statutory ceiling.

36. The computation also demonstrates that the separation of the rental receipt for the purpose of assessing it under the head “Income from house property” cannot be imported into the computation of book profit under Explanation 3. For the purpose of determining the ceiling under section 40(b)(v), the net profit disclosed in the Profit and Loss Account continues to include the rental receipt. At the same time, allowable interest payable to the partners is deducted because it is not remuneration required to be added back under Explanation 3. This interpretation reconciles the audited Profit and Loss Account, the computation of total income and the remuneration of Rs.99,02,526/- actually claimed by the assessee.

37. We accordingly hold that the Assessing Officer was not justified in reducing the disclosed profit by Rs.1,14,99,999/-merely because the gain on the sale of the depreciable shop premises was assessable as short-term capital gain under section 50. The learned CIT(A) also erred in treating the words “computed in the manner laid down in Chapter IV-D” as authorising the complete exclusion of every receipt assessable under another head. Such an interpretation renders the opening words “net profit, as shown in the profit and loss account” substantially redundant and impermissibly extends the fiction contained in section 50 beyond its legitimate field.

38. We shall now deal with the alternative contention raised in Ground Nos.3 and 4 concerning revenue neutrality and double taxation. The learned AR submitted that the remuneration was authorised by the partnership deed, was actually paid to the partners and was offered to tax by the partners in their individual returns for the same assessment year. These assertions were not factually controverted by the learned Departmental Representative, who merely relied upon the orders of the authorities below.

39. The same alternative contention was considered by the Coordinate Bench in Suresh A. Shroff & Co. (supra). In paragraph 14 of the order, the Co-ordinate Bench held as under:

“As regards alternate claim of the assessee that on the remuneration received by the partners of the firm, the partners have paid tax, which was not controverted by the Revenue, we are of the view that it cannot be taxed twice.”

40. For this proposition, the Co-ordinate Bench relied upon Vikas Oil Mill v. ITO (2005) 95 TTJ (Jp.) 1126, wherein it was observed:

“The remuneration received by the partners will have to be taxed either in the hands of the firm or in the hands of the partners. It cannot be taxed twice.”

41. Thereafter, in paragraphs 15 to 17, the Co-ordinate Bench examined and distinguished the decisions relied upon by the Revenue, and in paragraph 18 directed the Assessing Officer to include the income credited to the Profit and Loss Account in book profit and to allow the partners’ remuneration as claimed.

42. Revenue neutrality, by itself, cannot confer a deduction which is otherwise prohibited by an express statutory provision. In the present case, however, the assessee’s claim is not being allowed merely on the ground of revenue neutrality. On a proper interpretation of Explanation 3 to section 40(b), the profit on sale of the shop premises forms part of book profit and the remuneration claimed by the assessee is within the monetary ceiling prescribed by section 40(b)(v). The fact that the remuneration was actually paid and offered to tax by the partners reinforces the bona fide character of the claim and shows that there was no colourable diversion of the firm’s profits or loss of revenue to the exchequer. Sustaining the disallowance despite the remuneration being otherwise permissible under section 40(b)(v) would result in the same amount effectively suffering tax both in the hands of the partners and, by reason of the disallowance, in the hands of the firm.

43. In view of the foregoing discussion, we hold that the profit of Rs.1,14,99,999/- arising from the sale of the depreciable shop premises and credited to the Profit and Loss Account was required to be retained in computing book profit under Explanation 3 to section 40(b). After deducting the allowable interest payable to the partners, the relevant book profit works out to Rs.1,63,54,211/- and the maximum permissible remuneration works out to Rs.99,02,526.60. The assessee’s claim of remuneration of Rs.99,02,526/- is, therefore, fully allowable.

44. The Assessing Officer is accordingly directed to delete the disallowance of Rs.66,58,979/- and allow the remuneration of Rs.99,02,526/- claimed by the assessee. Ground Nos.1 and 2 are allowed. Ground Nos.3 and 4 are allowed in terms of our observations above. Ground No.5 is general in nature and requires no separate adjudication.

45. In the result, the appeal of the assessee is allowed.

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