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TMI Blog2014 (7) TMI 505X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of advance tax paid by the partners on the Partners‟ Remuneration while computing interest u/s 234B read with section 155(1A) of the Income Tax Act, 1961. 4. The appellant-Firm craves for its rights, without prejudice, to add, delete, alter, modify or otherwise present any grounds of appeal either at or before hearing of the appeal." 3. Apropos validity of initiation of re-assessment proceedings u/s 147/ 148 of the Act. 4. The undisputed facts are that notice u/s 148 of the Income Tax Act, 1961 (herein after 'the Act') for the Assessment Year 2006-07 was issued on 20th January 2010 by Assessing Officer, A. K. Dhir, ACIT, Circle 37(1), New Delhi. The assessee replied to the said notice by letter dated 22nd February 2011. Notice u/s 143(2) of the Act was issued by Gaurav Sharma ACIT, Circle 37(1) New Delhi, by notice dated 04.07.2011. According to the assessee, the reason to re-open was communicated to it only on 08th August 2011, meaning that the reasons to reopen was purportedly recorded and supplied to it well after the limitation expired on 31st March 2011. So according to the assessee, the notice before, recording the reasons, to reopen have vitiated the entire re-as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eassessment proceedings. The factual situation in the present case is entirely different from the facts of the case before Division Bench of this court in Haryana Acrylic Manufacturing co. (supra). The ratio laid down in that case can therefore hardly have any application to this case. Accordingly, the contention of the petitioner is rejected. 16. Respectfully following the decision of Hon‟ble Delhi High Court in case of A.G. Holdings (supra), we reject the first plea raised by the assessee." 5. In the light of the decision of the Hon'ble Jurisdictional High Court and the facts enumerated above, we are not inclined to accept the contention of the assessee that reassessment was bad in absence of reasons to reopen being supplied to it after limitation period prescribed by the Act. Therefore we dismisses this ground of the assessee and confirm the order of the ld CIT(A). 6. Ground No. 2 apropos not allowing partners' Remuneration u/s 40(b) of the Act. 7. We find that this issue has been already decided by the Hon'ble Jurisdictional High Court in assessee's own case for Assessment Year 2007-08 in ITA NO. 4738 and 4739/Del/2011. The Hon'ble High Court has held as under:- "20. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 7 of the partnership deed dated 1st May, 1976 profits and losses of the partnership, as the case may be, are to be divided and borne by the partners equally. Clause1, therefore, requires a mutual agreement in future. The aforesaid clause, therefore, does not satisfy the requirement that the payment of remuneration should be in accordance with the terms of the partnership deed and that the remuneration should relate to payments made in the period after the date of said partnership deed. The Tribunal is, therefore, right in their conclusion that clause 1 of the supplementary partnership deed dated 1st April, 1992, does not satisfy the requirements of section 40 (b) (v). From the said clause it is not possible to ascertain the quantum or the amount of remuneration which is payable in terms of the supplementary partnership deed. 10. This brings us to clause 2 of the supplementary deed dated 1at April, 1992. The first sentence is clause 2 states that the two partners will be the working partners. The second sentence in clause 2 stipulates that the total remuneration payable to the working partners under the Act, as applicable from time to time. The question is whether the two claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms of the supplementary partnership deed dated 1st April, 1992 though authorized by the said deed. The remuneration was paid in terms of a subsequent understanding between the two partners regarding the quantum and the amount to be paid. The said understanding has not been brought on record and probably was an oral understanding. The appellant has not 14 ITA Nos.4738 to 4740 /Del/2011 relied on or referred to any such " partnership deed" tribunal or before us. 13. Ratio of the decision of the Himachal Pradesh High Court in Commissioner of Income Tax Vs. Anil Hardware Store,[2010] 323 ITR 368 (HP), does not assist the stand a contention of the appellant. On examining the partnership deed, it was held that the two partners were entitled to 50% or equal amount as remuneration. The contention of the Revenue that the partnership deed did not exactly determine the remuneration payable to the partners, was rejected holding that the requirement payable to the partners, was rejected holding that the requirement of the Section was that the partnership deed should specify the amount payable or that the manner of quantifying the remuneration should be specified. In the said case, the High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08 and 209 of the Act. Thus there is no default in complying with the provisions of Sec. 208/209 so as to attract provisions of section 234B of the Act. According to the ld. AR, the partners had been paid their remuneration/ salary strictly in accordance with the terms of the partnership deed; and this amount paid to the partners did not exceed the maximum permissible amount prescribed by the Act and, therefore, the assessee was under bonafide belief of the entitlement for deduction. According to him, In CIT Vs. Anand Parkash (2009) Taxman 44 (Delhi) it was held that:- The levy of interest u/s 234B of the Act is compensatory in nature and is not in the nature of penalty. Where the revenue had not suffered any loss, therefore, there could be no question of levying interest u/s. 234B of the Act. So, according to the ld. AR, since the advance tax on the Partner Remuneration has been paid by the partners, therefore the remuneration to the partners disallowed in the hands of firm has to be adjusted. After such adjustment, the amount of tax paid on partners' remuneration is to be adjusted towards the tax liability of the assessee firm. According to ld AR, keeping in view the observation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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