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2023 (3) TMI 195 - AT - Income TaxStatus of assessee as "AOP" instead of "partnership firm" - Another partnership firm as Partner in the present Firm through its Partner respectively - Restriction as per the Indian Partnership Act, 1932 - HELD THAT:- The assessee firm was comprised of four individual partners who were representing their respective firms. It is, thus, in the backdrop of the aforesaid factual matrix that I shall herein deal with the proposition that as to whether or not such an arrangement is as per the mandate of law. It would be apposite to refer to the judgment of Ram Laxman Sugar Mills [1967 (3) TMI 17 - SUPREME COURT] as observed, that the mere fact that the manager of a HUF describing himself as a representative of the family had entered into an agreement of partnership with other persons could not form a basis to infer that an agreement of partnership was intended contrary to law between the HUF and other partners. There was no justification on the part of the lower authorities to have recharacterized the assessee firm i.e. a firm comprising of individual partners (representing their respective firms) as an "AOP". Thus, in terms of aforesaid observations set-aside the order of the CIT(Appeals) and direct the A.O. to assess the assessee firm in the status as that of a firm as therein claimed. Thus, the Ground of appeal No. 1 raised by the assessee is allowed in terms of my aforesaid observations. Disallowance u/s 14A - HELD THAT:- When both interest free funds and interest-bearing funds are available, then, it can safely be presumed that the interest free advances or investments in exempt income yielding assets were made out of the interest free funds is supported by the judgment of Pr. CIT Vs. Sintex Industries Ltd [2017 (6) TMI 601 - GUJARAT HIGH COURT] - Also, a similar view had been taken in the case of HDFC Bank Ltd.[2016 (3) TMI 755 - BOMBAY HIGH COURT] Thus, in terms of my aforesaid observation that the assessee had sufficient interest free funds available with it to source the investments in exempt income yielding mutual funds, thus, vacate the disallowance made/sustained by the lower authorities u/s. 14A of the Act. Thus, the Ground of appeal No. 2 raised by the assessee is allowed in terms of my aforesaid observation. Disallowance of claim for deduction of donation - claim for deduction of expense incurred was related to its business, therefore, the same was disallowed by the A.O. in view of provisions of Section 37 - HELD THAT:- Although the assessee specifically assailed the aforesaid disallowance before the CIT(Appeals), however, I find that the same had not been addressed by the said appellate authority while disposing off the appeal. Considering the fact that the CIT(Appeals) had failed to adjudicate the Ground of appeal No. 4, wherein the assessee had assailed the disallowance of its claim for deduction of donation restore the said issue to his file for adjudicating the same. Needless to say, the CIT(Appeals) shall grant a reasonable opportunity of being heard to the assessee while adjudicating the aforesaid issue. Thus, the Ground of appeal No. 3 raised by the assessee is allowed for statistical purposes.
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