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2016 (1) TMI 244 - AT - Income TaxStatus 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 ), we find no infirmity in the order of the ld. CIT(A). We therefore uphold the status of the assessee as a firm as the assessee has complied with the provisions of Section 184(2) of the Act. Consequent thereto, the disallowance of ₹ 8,23,506/- on account of claim of interest and remunerations paid to partners doesn t stand and the same should be allowed in the hands of the assessee taxed in the status of the firm.- Decided against revenue Disallowance on account of telephone 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 disallowance has to be reasonable, thus a disallowance of ₹ 50,000/- is reasonable. - Decided against revenue
Issues:
1. Claim of status as a firm without furnishing a certified copy of partnership deed. 2. Disallowance of interest and remuneration paid to partners. 3. Disallowance of telephone expenses. Analysis: Issue 1: Claim of status as a firm without furnishing a certified copy of partnership deed The Revenue challenged the CIT(A)'s decision to grant firm status to the assessee despite not submitting a certified copy of the partnership deed with the return of income as required by Section 184(2) of the Income Tax Act, 1961. The AO contended that the lack of the certified copy rendered the claim invalid, leading to the status being treated as AOP. However, the CIT(A) relied on precedents and held that filing the certified copy during assessment proceedings was sufficient. Citing the case of Ishar Das Sahni & Sons vs. DCIT, the Tribunal upheld the CIT(A)'s decision, emphasizing that the purpose of the law was fulfilled by submitting the document before the assessment was finalized. Therefore, the status of the assessee as a firm was upheld, and the disallowance of interest and remuneration was dismissed. Issue 2: Disallowance of interest and remuneration paid to partners The AO disallowed the claim of interest and remuneration paid to partners amounting to Rs. 8,23,506 due to the status being treated as AOP. However, the CIT(A) directed the AO to treat the assessee as a partnership firm, allowing the remuneration and interest to partners. The Tribunal, following the decision in Ishar Das Sahni & Sons vs. DCIT, upheld the CIT(A)'s order, stating that the assessee complied with Section 184(2) requirements. Consequently, the disallowance was not justified, and the amounts should be allowed in the hands of the firm. Hence, the Revenue's grounds on this issue were dismissed. Issue 3: Disallowance of telephone expenses The AO disallowed a portion of telephone expenses claimed by the assessee, stating they were not related to the business and were not in the name of the assessee or installed on business premises. The CIT(A) restricted the disallowance to Rs. 31,366 out of Rs. 81,336, considering the primary use of telephones. The Tribunal concurred with the CIT(A)'s decision, finding it reasonable and sustained the restriction. Consequently, the Revenue's appeal was dismissed, and the decision was pronounced on 16/10/2015.
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