ABHAY SINGH SURANA vs THE SECRETARY .

The Supreme Court held that royalty payments made by a company to a partnership firm do not fall under Section 40(c) of the Income-Tax Act, 1961, even if the partners are also directors of the company. The Court established that such payments are made in consideration of a valuable right parted by the firm, and not merely as payments to directors in their official capacity. The Court allowed the appeal, reversing the High Court's decision which had favored the revenue's disallowance of the deductions.