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TMI Blog2014 (7) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed deduction for remuneration paid to partners as per partner ship deed read with supplementary deed of partner ship entered on first day of April, 1992. 3. The Assessing Officer has observed that during the course of assessment proceedings for assessment year 2007-08, the claim of salaries/ remuneration to the partners was disallowed, in the hands of the firm u/s 40(b) on the ground that the partner ship deed neither specified the amount of salaries required to be paid to each of the working partners nor had laid down the specific method of quantification thereof as laid down in section 40 (b) (v). He pointed out that facts for the assessment year 2003-04 were same as for assessment year 2007-08 and, therefore, he issued notice u/s 148 on 13th March, 2010 for disallowing the claim regarding partner's salary of Rs. 15,19,000/-. After considering the assessee's submissions, he made an addition on Rs. 12,01,344/- on account of disallowance of salary/ remuneration paid to partners. Before Ld. CIT (A) the assessee assailed the initiation of proceedings u/s 147 /148 of the Act on following grounds: (i) The assessee had not been provided with the reasons for initiating proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee for assessment year 2003-04 is contained. He further referred to page two of the paper book wherein the letter dated 5th April, 2010 in reply to notice u/s 148 dated 30th March, 2010 is contained to demonstrate that assessee had asked for the reasons recorded u/s 148. 8. He further referred to page four of the paper book wherein the letter addressed to the Assessing Officer dated 19th October, 2010 is contained in which again assessee required the Assessing Officer to intimate the reasons for reopening the assessment u/s 148. 9. Ld. Counsel further referred to page two of the assessment order to point out that on 11th November, 2010 the assessee was asked to show cause why deduction claimed for salaries/ remuneration to the partners be not disallowed u/s 40(b) (v) since, the partnership deed neither specified the amount of salaries required to be paid to each of the working partners nor had laid down the specific method of quantification thereof. 10. Ld. Counsel referred to page 11 and 12 of paper book wherein the letter dated 22nd November, 2012 is contained in which the assessee had furnished note on working partner's remuneration allowable as per provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing all these legal requirements, notice was issued on 30th March, 2010 u/s 148 to assessee and the reasons were only provided to assessee on 22nd November, 2010 as is evident from the copy of the order sheet also in this regard. She therefore, submitted that in view of the decision of Hon'ble Jurisdictional High Court in the case of A.G Holdings Pvt. LTd. Vs. ITO (Supra) re-assessment proceedings cannot be held to be bad in law. 14. We have considered the submissions of both the parties and have perused the record of the case. The assessee has assailed the initiation of the reassessment proceedings on two counts -firstly that the reasons were recorded after issuance of notice u/s 148 and, secondly, the assessee was not given an opportunity to file the objections and even if the assessee's letter dated 22nd November, 2010 was considered as the objection filed by assessee, the same has not been disposed of by Assessing Officer by any speaking order in terms of the decision of Hon'ble Supreme Court in the case of GKN Drive Shafts Ltd. Vs. ITO. 15. As far as the first objection of assessee is concerned, from the documents filed by Ld. DR as noted above, it is evident that the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed reply on this count. 18. Thereafter, assessee participated in assessment proceedings and after considering the assessee's reply the assessment order was passed. Admittedly on 22nd November,2010 the reasons were provided to assessee and the assessee did not filed any separate objection because it had already filed a detailed note on the main issue regarding remuneration paid to partners. 19. The assessment order was passed on 10th December, 2010 and, therefore, if assessee had any objection regarding validity of issuance of notice u/s 148 then it could have filed objections again supplementing its objections dated 22nd November, 2010. However, assessee chose not to file any objection and participated in proceedings. Under such circumstances it cannot be said that the requirement of law regarding filing of objection by assessee to notice u/s 148 and disposing of the same by Assessing Officer were not substantially fulfilled. Therefore, the re-assessment proceedings cannot be held to be bad in law. 19. In the result the cross objection filed by the assessee is dismissed. Now, we take up the appeal filed by Department. 20. Both the parties agreed that the issue is covered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be, are to be divided and borne by the partners equally. Clause1, therefore, requires a mutual agreement in future. The aforesaid clause, therefore, does not satisfy the requirement that the payment of remuneration should be in accordance with the terms of the partnership deed and that the remuneration should relate to payments made in the period after the date of said partnership deed. The Tribunal is, therefore, right in their conclusion that clause 1 of the supplementary partnership deed dated 1st April, 1992, does not satisfy the requirements of section 40 (b) (v). From the said clause it is not possible to ascertain the quantum or the amount of remuneration which is payable in terms of the supplementary partnership deed. 10. This brings us to clause 2 of the supplementary deed dated 1at April, 1992. The first sentence is clause 2 states that the two partners will be the working partners. The second sentence in clause 2 stipulates that the total remuneration payable to the working partners under the Act, as applicable from time to time. The question is whether the two clauses read together quantify or stipulate the manner of quantifying the remuneration that is payable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of a subsequent understanding between the two partners regarding the quantum and the amount to be paid. The said understanding has not been brought on record and probably was an oral understanding. The appellant has not relied on or referred to any such " partnership deed" tribunal or before us. 13. Ratio of the decision of the Himachal Pradesh High Court in Commissioner of Income Tax Vs. Anil Hardware Store,[2010] 323 ITR 368 (HP), does not assist the stand a contention of the appellant. On examining the partnership deed, it was held that the two partners were entitled to 50% or equal amount as remuneration. The contention of the Revenue that the partnership deed did not exactly determine the remuneration payable to the partners, was rejected holding that the requirement payable to the partners, was rejected holding that the requirement of the Section was that the partnership deed should specify the amount payable or that the manner of quantifying the remuneration should be specified. In the said case, the High Court held that the manner of fixing the remuneration was specified in the partnership deed. 14. On reading the supplementary partnership deed, in the present case, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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