MART Vs ACIT (ITAT Delhi)
The issue in dispute before us in respect of remuneration given to the partners, which has been disallowed in terms of section 185 of the Act, which says that “if a firm does not comply with the provisions of section 184 of the Act for any assessment year, then no deduction by way of payment of interest, salary, bonus, commission or remuneration made by the firm to any partner of such firm shall be allowed”. The section 184 of the Act requires that a certified copy of the instrument of the partnership should be accompanied along with the return of income of the firm, whenever assessment of the firm is sought for first time.
Where assessee-firm had submitted only photo copy of the partnership deed which was without any certification, and further the deed was not witnessed by any person as required under section 184, therefore, the issue with respect to deductibility of partners remuneration was remanded back to AO with a direction to assessee to comply with the provisions of section 184(2).
FULL TEXT OF THE ITAT JUDGMENT
This appeal by the assessee is directed against order dated 31/03/2015 passed by the Ld. Commissioner of Income-tax (Appeals)-XX, New Delhi [in short ‘the Ld. CIT(A)’]for assessment year 2011-12 raising following grounds:
1. That the order of learned CIT (A) sustaining the order of the learned Assessing Officer is bad in law and on facts and is liable to be set-aside.
2. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. Assessing Officer in disallowing remuneration paid by the appellant amounting of Rs. 69,30,000/- u/s 185 of the Income tax Act, 1961 on account of failure to meet the requirement of section 184 of the Income Tax Act, 1961, though there is no failure on the part of the appellant.
3. That the Learned CIT(A) and Assessing Officer have failed to appreciate that appellant is a firm carrying on the profession for the last several years and it is evidenced by Deed of Partnership, copy of which was filed during the course of assessment & appellate proceedings and original deed was produced before the Assessing Officer and CIT (A) for
4. That the learned CIT(A) and Assessing Officer have erred both in law and on facts in adopting the ‘status’ of the appellant, while framing the assessment as that of A.O.P. instead of ‘Firm’.
5. That having regard to the fact and circumstances of the case, the Ld. CIT(A) has erred in confirming the addition of Rs. 175492/- made by learned Assessing Officer on account of vehicle maintenance expenses
6. That the orders passed by learned CIT(A) and Assessing Officer are totally against the principles of natural justice.
7. That the appellant pray for leave to add, alter, amend or delete above ground of appeal either before or at the time of hearing.
2. Briefly stated facts of the case are that the assessee firm was engaged in professional consultancy and for the year under consideration filed return of income on 19/09/2011, declaring total income of Rs.37,71,240/-. The case was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (in short the ‘Act’) was issued and complied with. The scrutiny assessment under section 143(3) of the Act was completed on 14/03/20 14, after making various disallowances aggregating Rs.71,55,031/-, which includes disallowance of Rs.69,30,000/- on account of remuneration to partners. Aggrieved, the assessee filed appeal before the Ld. CIT(A), who dismissed the appeal of the assessee. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above.
3. The ground No. 1 of the appeal is general in nature and covered by the other grounds raised and, thus, we are not required to adjudicate upon this ground specifically.
4. The grounds No. 2 to 4 are related to disallowance of remuneration to partners of Rs.69,30,000/-. The Assessing Officer made the disallowance under section 185 of the Act observing that the assessee submitted only photo copy of the partnership deed and failed to provide certified copy of the same as required under section 184 of the Act. During appellate proceedings before the Ld. CIT(A), the matter was remanded back to the Assessing Officer and assessee was asked to file certified copy and produce the original copy of the partnership deed for However, the Ld. CIT(A) in the impugned order observed that the claim of the assessee of producing the original partnership deed in letter dated 07/03/2014 was not correct. The Ld. CIT(A) made factual observations as under:
“It is an undisputed fact that the appellant firm was
