TMI Blog2001 (10) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... essee being C.O. Nos. 15 16/Nag/2001. Accordingly the same are dismissed as not pressed. 3. At the outset we may mention that the assessee despatched its appeals being ITA Nos. 985 986/Nag/96 by Registered Post on 17-12-1996 which were received by this office on 23-12-1996 and the impugned orders of the learned CIT (Appeals) having been served on the assessee on 21-10-1996 there was a delay of 3 days in filing the said appeals. Before us the assessee has filed a petition dated 10-4-2000 requesting for the condonation of this delay and after considering the reasons given therein as well as the facts apparent from record, we have condoned the delay of meagre 3 days in filing the said appeals by the assessee. 4. We first take up the assessee's appeal being ITA No. 986/Nag/96 which is preferred against the order passed by the learned CIT (Appeals)-I, Nagpur dated 9-9-1996 while disposing of the assessee's appeal preferred against the order under section 154 passed by the Assessing Officer for assessment year 1994-95. In this appeal the assessee has taken various grounds challenging the orders of the authorities below in law as well as on the factual merits of the case. As far a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 154 in pursuance of the same. As the assessee has succeeded on this preliminary legal ground resulting into quashing of the order passed by the Assessing Officer under section 154 by us, we do not deem it necessary to consider and decide the other grounds raised by the assessee in this appeal on the factual merits of the case as the same have become only of academic nature. We may also make it clear that although the order passed under section 154 in this case for assessment year 1994-95 has been quashed by us allowing the appeal of the assessee being ITA No. 986/Nag/96, the order passed by the Assessing Officer under section 143(3) for the same year i.e., assessment year 1994-95 very much survives and so also the appeal of the assessee in ITA No. 985 /Nag/96 which is now being taken up for consideration and disposal. 5. The appeal of the assessee in ITA No. 985 /Nag/96 is directed against the order of the learned CIT (Appeals)-I, Nagpur dated 24-9-1996. 6. In this case the assessee claimed deductions under sections 80HH and 80-I on the gross total income before deducting interest and remuneration paid to partners. The Assessing Officer, however, was of the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter deducting the interest and remuneration paid to the partners the Assessing Officer took a different stand in contradiction to the specific terms and conditions of the partnership deed. Relying on the decisions of Hon'ble Supreme Court in the case of CITv. J.P. Kanodia Co. [1970] 77 ITR 515 as well as that in the case of Khanjan Lal Sewak Ram v. CIT[1972] 83 ITR 175, he contended that the Department ought to have adhered to the terms of partnership deed and accordingly relief should have been granted to the assessee-firm. He further contended that as per the provisions of Indian Partnership Act, 1932, the partnership firm is not a distinct legal entity apart from the partners constituting it and as such the authorities below were not justified in treating the income of the firm and that of partners separately for the purpose of allowing deductions under sections 80HH and 80-I. In support of this contention he relied on the decision of Hon'ble Supreme Court in the case of Malabar Fisheries Co. v. CIT[1979] 120 ITR 49 as well as in other cases reported in CIT v. A.W. Figgies Co. [1953] 24 ITR 405 and Dulichand Laxminarayan v. CIT [1956] 29 ITR 535. He also contended that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of CIT v. R.M. Chidambaram Pillai [1977] 106 ITR 292. As regards the reliance placed by the Assessing Officer on the provisions of section 80AB and section 80B(5) he contended that the same have no bearing whatsoever on the issue under consideration because the deduction on account of interest and remuneration paid to the partners as per the provisions of section 40(b) are nothing but the bifurcation/distribution of the profit of the firm among the partners. He also contended that the learned CIT(A) has also upheld the view canvassed by the assessee for assessment years 1997-98 and 1998-99 while allowing deductions under sections 80HH and 80-I on the gross total income of the firm before deducting interest and remuneration paid to the partners and, therefore, there is no case for the Revenue to dispute the deductions rightly claimed by the assessee under sections 80HH and 80-I. In support of this contention, he placed reliance on the Hon'ble Supreme Court's decision in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 wherein the Hon'ble Apex Court has held that if the language of a taxing provision is ambiguous or capable of more than one meaning, the meaning/vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the learned counsel for the assessee in the light of number of decisions cited by him in support, she contended that all those decisions relate to the assessment years earlier to assessment year 1993-94 and considering the amendment made in the provisions of section 40(b), the same cannot be applied to the cases involving assessment years 1993-94 onwards including the present cases involving assessment years 1994-95, 1997-98 and 1998-99. According to her, as per the amended provisions of section 40(b), deductions in respect of interest and remuneration paid to the partners have been made admissible and the assessee-firm having claimed the same, its gross total income for the purpose of allowing deductions under sections 80HH and 80-I ought to be taken after deducting the said amounts. She contended that as per the said amendment made effective from assessment year 1993-94, section 40(b) provides for disallowance of interest and remuneration paid to the partners only to the extent to which the same exceed the limit specified therein and as far as payment of such expenses within the said specified limits is concerned, the same is very much allowed under the said section. Relying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents which were earlier considered as one form of distribution of profits among the partners are now treated as admissible expenditure in the determination of income of the assessee-firm. The learned counsel for the assessee has also contended before us that the partnership firm is not a distinct legal entity independent of its partners and, therefore, there is no distinction between the income of the firm and the income of its partners. Here we may observe that although the partnership firm is not considered as a separate legal entity in the eyes of law, the same is very much considered as a separate assessable unit as per the provisions of Income-tax Act and accordingly the income of the firm is determined/ computed separately and independently for the purpose of determining its tax liability. Moreover, the income of the firm is computed as per the provisions of the Income-tax Act including the provisions of section 40(b) which specifically allow deductions on account of interest and remuneration paid to the partners subject to certain limits specified therein and the tax is levied on the income of the firm computed as such net of interest and salary paid to the partners. 14. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 15. The learned counsel for the assessee has also contended that the deed of partnership of the assessee-firm was duly amended to provide specifically that the interest and remuneration to partners would be allowed from the income of the firm after allowing deductions under sections 80HH and 80-I and, therefore, the authorities below were not justified in ignoring the said terms and conditions of partnership deed. In this regard, it is observed that the relevant terms and conditions of the partnership deed of the assessee-firm, as amended, are not in conformity with the provisions of law. It is a settled position of law that the terms of the partnership cannot override the provisions of Income-tax Act and in the event of any conflict between the terms of partnership deed and provisions of the taxing statute, the latter shall prevail over the former. 16. From the discussions made in the preceding paras, it becomes abundantly clear that the various contentions raised by the learned counsel for the assessee as also the several decisions cited by him in support of his contentions have become irrelevant in view of the amendment made in the provisions of section 40(b) from assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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