TMI Blog2014 (7) TMI 505X X X X Extracts X X X X X X X X Extracts X X X X ..... emuneration should be stipulated in the partnership deed - The expression "in accordance with the terms of the partner deed" read with clause (iii) of section 40 (b), requires and mandates that the quantum of remuneration or the manner of computation of quantum of remuneration should be stated in the partnership deed and should not be left undermined, undecided or to be determined or decided on a future date - the remuneration is not specified - The manner of computing the remuneration is not specified - the remuneration payable is left to future mutual agreement between the partners who are entitled to decide and quantify the quantum - Remuneration can be any amount or figure but not more than the maximum amount stated in Section 40 (b) (v) of the Act – thus, the order of the CIT(A) is upheld – Decided against Assessee. Non-consideration of the payment of advance tax paid by the partners on the Partners’ Remuneration – Computation of interest u/s 234B r.w. section 155 (IA) of the Act – Held that:- CIT(A) has not adjudicated the issue saying that charging of interest u/s 234 of the Act is consequential - as per the provision of section 155(IA) of the Act wherein respect of any c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 22nd February 2011. Notice u/s 143(2) of the Act was issued by Gaurav Sharma ACIT, Circle 37(1) New Delhi, by notice dated 04.07.2011. According to the assessee, the reason to re-open was communicated to it only on 08th August 2011, meaning that the reasons to reopen was purportedly recorded and supplied to it well after the limitation expired on 31st March 2011. So according to the assessee, the notice before, recording the reasons, to reopen have vitiated the entire re-assessment and so is void-ab-initio. However, we find that there are two flaws to the said contention, firstly the outer limit prescribed by Section 149 will expire only on 31.03.2013 for Assessment Year 2006-07, which is the relevant year for our consideration secondly the reasons which is on record is found to be not dated ;and the reasons have been recorded and signed by the Assessing Officer, who has sent the notice u/s 148 on 20th January 2010 and not by the present Assessing Officer, who has simply forwarded the copy of the reasons recorded by his predecessor A.O. ( A.K. Dhir)from which we can safely infer that the reasons were recorded before the issue of notice by the present incumbent. This inference o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons to reopen being supplied to it after limitation period prescribed by the Act. Therefore we dismisses this ground of the assessee and confirm the order of the ld CIT(A). 6. Ground No. 2 apropos not allowing partners Remuneration u/s 40(b) of the Act. 7. We find that this issue has been already decided by the Hon ble Jurisdictional High Court in assessee s own case for Assessment Year 2007-08 in ITA NO. 4738 and 4739/Del/2011. The Hon ble High Court has held as under:- 20. Both the parties agreed that the issue is covered by the decision of Hon'ble Jurisdictional High Court against the assessee in assessee's own case for assessment year 2007-08 wherein, it has been held as under: 5. Clause (iii) and other clauses in Section 40 (b) specifically use the expression in accordance with the terms of the partnership deed. This clearly indicates and manifests the legislative mandate that the quantum of remuneration or the manner of computing the quantum of remuneration should be stipulated in the partnership deed. The expression in accordance with the terms of the partner deed read with clause (iii) of section 40 (b), requires and mandates that the quantum of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id 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 to the partners? Having examined the said clauses, we feel that on conjoint reading of clause 7 of the partnership deed dated 1st May, 1976 and clause 1 and 2 of the supplementary partnership deed dated 1st April, 1992, condition of Section 40 (b) (v). 13 ITA Nos.4738 to 4740 /Del/2011 11. Clause 2 of the supplementary deed has to be read along with clause 1 of the same deed. These two clauses have to be read harmoniously and reasonable to understand the two convenants and give effect to their true meaning. The second sentence of clause 2 neither quantifies nor lays down the manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is clear that the remuneration is not specified. The manner of computing the remuneration is not specified On the other hand, the remuneration payable is left to future mutual agreement between the partners who are entitled to decide and quantify the quantum. Remuneration can be any amount or figure but not more than the maximum amount stated in Section 40 (b) (v) of the Act. Therefore, the requirement of Section 40 (b) (v) are not satisfied. 8. In the light of the order of the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the nature of penalty. Where the revenue had not suffered any loss, therefore, there could be no question of levying interest u/s. 234B of the Act. So, according to the ld. AR, since the advance tax on the Partner Remuneration has been paid by the partners, therefore the remuneration to the partners disallowed in the hands of firm has to be adjusted. After such adjustment, the amount of tax paid on partners remuneration is to be adjusted towards the tax liability of the assessee firm. According to ld AR, keeping in view the observation of the jurisdictional High Court that, since there is no case of loss to the revenue, levy of interest u/s. 234 of the Act cannot be imposed. The ld. AR cited the case of CIT Vs. K K Marketings (2005) 278 ITR 596 (Del) to drive a point that in that case the parties requested the revenue that the cash seized from the premises of the firm to be adjusted towards the advance tax liability of the firm in order to avoid interest was upheld by the jurisdictional High Court holding that the said request was equitable and reasonable and dismissed the appeal of the Revenue. So by applying the same analogy, the ld. AR contends that since the partners have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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