TMI Blog2010 (7) TMI 1215X X X X Extracts X X X X X X X X Extracts X X X X ..... below in holding the assessee s status as that of AOP and not that of a firm and assessee as such and thereafter disallowing the salary and interest paid to partners in all these years. (ii) Sustaining following disallowances A.Y. 2003-04: - Shop expenses Rs. 25,000/- - Out of misc./ conveyance expenses = Rs. 25,000/- A.Y. 2005-06: Ad hoc disallowance out of shop/misc./traveling/ telephone expenses restricted to Rs. 90,000/- from Rs. 1,45,000/- A.Y. 2006-07: Ad hoc disallowance out of license fee, rent, shop expenses, vehicle running, vehicle repair, telephone expenses and traveling expenses restricted to Rs. 1,00,000/- from Rs. 2,00,000/-. (iii) Charging of interest u/s 234B 234C. 2. Brief facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnilal Vs. CIT 234 ITR 472 (SC) 2.3. Aggrieved, assessee preferred first appeal, where it was pleaded that: (i) Hon ble Supreme Court in the case of Rangila Ram others 254 ITR 230 has upheld the proposition that firm can be formed by joining other persons as financing partners. (ii) There was a change in law vis a vis registration of the firm in terms of sec. 184/185 w.e.f. 1-4-1994. Earlier AO had power to decide the genuineness of the fir, whereas after 1-4-1994, amended law provides that the firm shall be granted registration if a certified copy of duly executed partnership deed, bearing signatures of all the partners is filed. The Supreme Court judgments being on interpretation of earlier law, were not applicable in view of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guments and case laws referred to before CIT(A) and contends that above Supreme Court cases in the cases of Bihari Lal Jaiswal and Moti Lal Chunnilal (supra), were not applicable in view of the specific amendment in section 184 for registration of the firm i.e. from 1-4-1994. The amended procedure for registration prescribes only furnishing of certified copy of the partnership deed duly signed by all the partners declaring the shares of the partners in the firm, which has been duly complied with by the assessee. Due to amendment in the law, in the given circumstances, assessee firm cannot be held to be void, illegal or non-genuine. Further, U.P. Excise Laws vide government order no. 647E-2/13-2003 dated 28-2-2003 has declared new excise pol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 4 of the Partnership Act, a partnership firm is a contract between the partners to carry on the business in the name of firm for and on its behalf. In view of section 4 of the partnership and declared liquor policy in U.P., amendment in section 184, the assessee having complied with the requirement of registration of firm as per the amended sections 184/185, the firm shall be granted registration. 2.8. Learned counsel relied on the order of ITAT Bangalore Bench in the case of DCIT Vs. H.E.D. Bros. Co. (2005) 1 SOT 881, which in similar circumstances has held as under: The provision relating to assessment of firm has undergone a substantial change with effect from 1-4-1993. The concept of registered firm and unregistered firm is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amended law, the firm shall be allowed registration if a certified copy of a deed, duly signed by all the partners showing the shares of the partners is filed, the firm is allowed to be registered. U.P. Excise policy does not prohibit constitution of partnership firm for carrying liquor business, so also licenses obtained by individuals can be converted into partnership firm on compliance of certain requirements. In vie of these facts and legal propositions, the assessee firm having constituted specific clause 11 as mentioned above, it cannot be held that it is a non-genuine or illegal firm. Earlier Supreme Court cases are not applicable to assessee s case in view of the amendment in sections 184/185 w.e.f. 1-4-1994, as mentioned above. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record. As the facts emerge, AO in his order has merely referred to excessiveness of expenditure; self made vouchers and without assigning any reasons ad hoc disallowances have been made, which in A.Y. 2003- 04 have been upheld by CIT(A) and in A.Y. 2005-06 2006-07 have been partly confirmed. In our view, if the books of assessee are properly maintained and produced before AO, the disallowance shall proceed on items of expenditure, which are not proved by the assessee. Ad hoc disallowance in every year without assigning any reasons is not justifiable. In view thereof, we are inclined to delete the ad hoc disallowance as upheld by CIT(A). Assessee s grounds in this behalf are allowed. 8. Charging of interest u/s 234(b) (c) is conse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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