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TMI Blog1989 (2) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals were fixed for hearing after due notice to the parties. We find that the AD card is on record. However, when these appeals were called on for hearing, there was no representation either through the authorised representative or in person by any of the partners of the firm. The appeals, therefore, have been heard ex parte on merits, qua, the respondent and are being disposed of in accordance with law. 2. We find that for the assessment year 1978-79 the original return was filed on31-3-1979and an ex parte assessment was made u/s. 144 on31-3-1981. However, that assessment was cancelled by invoking provisions of section 146 of the Act. Another assessment was made u/s 144 on30-12-1981and that assessment was set aside by the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35,761 & Rs. 30,742 respectively for the asst. years 1978-79 and 1979-80. The position regarding the assessment year 1981-82 is not clear though the salary and interest were disallowed similarly. For the asst. year 1982-83 interest paid to partner and disallowed amounted to Rs. 19,412. These assessments were challenged in appeal before the AAC. 5. Before the AAC in appeal a ground was projected that the ITO had erred in adding the amount of interest and salary paid to partners as inadmissible because once the status was taken as unregistered firm, then the expenses by way of interest and salary to the partners should have been allowed in full. The ground projected in this manner related to assessment years 1978-79 and 1979-80. However, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l also include any person who, being a minor, has been admitted to the benefits of partnership." 8. We also find that in the Indian Partnership Act, 1932 partnership is defined in section 4. As per section 4 partnership is the relation between persons, who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons, who have entered into partnership with one another are called individually " partners " and collectively " a firm ", and the name under which their business is carried on is called the " firm name ". The Partnership Act does not appear to make any distinction between a registered firm and an unregistered firm in general. 9. However, section 69 of the Partnership Act requires registra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm and the tax payable by the partners individually, if the firm were so assessed would be greater than the aggregate amount of the tax payable by the firm, under clause (a) and the tax which would be payable by the partners individually may proceed to make the assessment under sub-section (1) of section 182 as if the firm were a registered firm. It is also provided that where the procedure specified in this clause i.e. (b) is applied to any unregistered firm, the provisions of sub-sections (2), (3) and (4) of section 182 shall apply thereto as they applied in relation to a registered firm. " The Legislature having so provided a method for the assessment of firms has than proceeded to lay down the prerequisites for registration of a firm a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting the income from profits and gains of business or profession, in sections 28 to 39. Clause (b) of section 40 provides that in the case of any firm, any payment of interest, salary, bonus, commission or remuneration paid by the firm to any partner of the firm shall not be deducted in computing the income chargeable to tax under the head profits and gains of business or profession. Clause (b) does not refer to a registered or an unregistered firm but refers only to the " case of any firm ". 12. From what is stated above, it becomes clear that there is no distinction, whatsoever, between a firm and a registered firm in so far as computation of the firm's total income is concerned. It is only after the computation of total income of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... muneration made by the firm, to any partner of the firm. It is also pertinent to note that registration is not part of the process of assessment itself. Registration is granted under different sections on specific requirements being fulfilled and continues only for a year. Therefore, in the process of determination of the total income of a firm there is no distinction in law between a registered firm, and an unregistered firm. It, therefore, follows that while determining the total income of any firm payment of any interest, salary, bonus, commission or remuneration made by the firm to any partner has to be disallowed by virtue of the provisions of section 40(b) of the Act. This is a special provision made by the Legislature and, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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