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2016 (1) TMI 244 - ITAT JAIPUR

2016 (1) TMI 244 - ITAT JAIPUR - TMI - Status of firm - copy of partnership deed has not furnished alongwith return of income which is mandatory as per Section 184(2) - Whether the certified copy of the partnership deed was required to be filed along with the return of income or whether the same could be filed before the AO before he concludes the assessment proceedings? - Held that:- Following the coordinate Bench in the case of Ishar Das Sahni & Sons vs. DCIT (2000 (5) TMI 167 - ITAT DELHI-A ) .....

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expense - CIT(A) restricted disallowance - Held that:- The Assessing Officer disallowed telephone expenses of ₹ 81,336/-on the ground that the telephones were not in the name of the assessee. One of the mobile was in the name of Suraj Medical (Prop. Lucky Batla). Similarly, other telephones were also not in the name of assessee. The telephones were in the name of persons who were doing their own business and primary use of telephone was obviously for their own purposes. However, the disall .....

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es of the case, the ld. CIT(A) has erred in:- (i) granting status of firm to the assessee in spite of the fact that a certified copy of partnership deed has not furnished alongwith return of income which is mandatory as per Section 184(2) of the I.T. Act, 1961. (ii) deleting disallowance of ₹ 8,23,506/- on account of claim of interest and remuneration paid to partners treating status of firm (iii) restricting disallowance on account of telephone expense from ₹ 81,366/- to ₹ 31, .....

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of wholesale dealership of surgical items and medicines. The assessee filed its return of income of ₹ 50,868/- on 31-10-2005 which was scrutinized u/s 143(3) of the Act. During the course of assessment proceedings, the AO observed that the assessee had claimed its status as firm as per return of income but the necessary requirement i.e. certified copy of partnership deed to claim the status as firm has not been accompanied as it was mandatory on the part of the assessee. In this view of t .....

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AO however, felt it necessary to quote the following relevant provisions of Section 184(2) of the Act before deciding the issue: A certified copy of the instrument of partnership referred to in sub-section (1) shall accompany the return of income of the firm of the previous year relevant to the assessment year commencing on or after the 1st day of April, 1993 in respect of which assessment as a firm is first sought. Explanation - For the purpose of this sub-section, the copy of the instrument o .....

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ory to claim the status of firm if it is relevant to the year of execution of partnership deed and it has not been done by the assessee. Thus the AO in view of the above deliberations observed that assessee s claim of the status as firm is not tenable in the eyes of law and the AO after rejecting the claim of status as firm has taken the status of the assessee as AOP as per Act and disallowed the claim of interest and remuneration of two partners of ₹ 7,02,094 + ₹ 1,21,412 = ₹ .....

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indings, assessee's submission and the judgment of Hon'ble ITAT . In view of the judgement of Hon'ble ITAT, I am of the opinion that it would be sufficient that the assessee files certified copy of partnership deed during the course of assessment proceedings. In view of the above, the AO is directed to treat the assessee as partnership firm and allow the remuneration to the partners and interest to capital to partners. This ground of appeal is, therefore, allowed. 3.3 The ld. DR reli .....

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ispute that the AO has not found any infirmity or illegality in the partnership deed. Only dispute is regarding the point of time when the assessee was required to file the certified copy of the partnership deed in compliance with section 184(2) of the Act. Whether the certified copy of the partnership deed was required to be filed along with the return of income or whether the same could be filed before the AO before he concludes the assessment proceedings. It is noted that the above issue is s .....

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)]. This condition is a reproduction of s. 184(i)(ii) of pre-1993 Section. (iii). A certified copy of the instrument of partnership shall accompany the return of income of the firm of the previous year relevant to assessment year 1993-94 or any subsequent assessment year, in respect of which assessment is a firm is first sought [s. 184(2)]. The conditions at (i) and (ii) above go to the very root of adoption of status as a firm. If these conditions are not satisfied, the object of the legislatur .....

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es of assessment as a firm. Therefore, if the certified copy of the instrument is available before the Assessing Officer when he sits down for framing the assessment on merits, the object of the Legislature is achieved because it is at that stage that the compliance of the requirements of section 184(2) is to be ascertained. If that was so, the requirement of the certified copy accompanying the return does not seem to be of such a compelling nature that it may lead to denial of the status of a f .....

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to ensure that only the properly constituted firms are assessed as firms and as long as this objective is fulfilled before the assessment is finalised, the purpose of the statute is served. Hence, denying the status of firm to the assessee in the instant case merely on the ground that the certified copy of the partnership deed was not enclosed with the return, though given later at the time of assessment, would be unjustified.- State of Tamil Nadu vs. Kodai Kanal Motor Union (P) Ltd. AIR 1986 SC .....

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in the hands of the assessee taxed in the status of the firm. Thus, Ground No. 1 and 2 raised by the Revenue are dismissed. 4.1 Ground No 3. of the Revenue is for restricting the disallowance on account of telephone expense from ₹ 81,336/- to ₹ 31,366/-. 4.2 Brief facts relevant for this ground are that the assessee had claimed ₹ 97,992/- on account of telephone and mobile expenses. However, on scrutiny of the record, the AO observed that phones/ mobiles are not related to the .....

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