1. This appeal by the assessee is directed against the order of the AAC dated 2-8-1982 relating to the assessment year 1981-82. The interesting issue that arises out of this appeal is whether on the facts and in the circumstances of the case, the assessee is entitled to standard deduction under Section 16(i) of the Income-tax Act, 1961 ('the Act'), out of salary income of Rs. 9,600 received as a partner from the firm of Narang Motor Transport Corporation.
2. The assessee is a partner in the firm of Narang Motor Transport Corporation having 50 per cent share of profit. During the accounting period relevant to the assessment year under appeal, the assessee received salary of Rs. 9,600 as a part of his share from the firm. He claimed deduction of Rs. 1,920 out of his salary. This claim was negatived by the ITO as well as by the AAC.3. After hearing both the sides, I find that under Section 67(1)(b) of the Act, where the amount apportioned to the partner is a profit, any salary, interest, commission or other remuneration paid to the partner by the firm in[ respect of the previous year shall be added to that amount, and the result shall be treated as the partner's share in the income of the firm. In view of this provision of law, the salary of Rs. 9,600 received by the assessee has to be treated as the partner's share in the income of the firm. The Supreme Court in the case of CIT v. R.M.Chidambaram Filial  106 ITR 292 has held that a firm is not a legal person even though it has some attributes of personality. In income-tax law a firm is a unit of assessment, by special provisions, but is not a full person. Since a contract of employment requires two distinct persons, viz., the employer and the employee, there cannot be a contract of service, in strict law, between a firm and one of its partners. Payment of salary to a partner represents a special share of the profits. Salary paid to a partner retains the same character of the income of the firm.
4. In view of the above position of law, relating to the salary received by a partner from a firm it is clear that standard deduction as envisaged in Section 16(i) as a deduction from salaries cannot be granted because such salary cannot be brought to tax under the head 'Salaries' as enumerated in the heads of income in Section 14 of the Act. The orders of the authorities below are, therefore, not assailable.