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TMI Blog2016 (1) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 obv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 2 of the Revenue. The brief facts of the case are that the assessee derives income from business of wholesale dealership of surgical items and medicines. The assessee filed its return of income of ₹ 50,868/- on 31-10-2005 which was scrutinized u/s 143(3) of the Act. During the course of assessment proceedings, the AO observed that the assessee had claimed its status as firm as per return of income but the necessary requirement i.e. certified copy of partnership deed to claim the status as firm has not been accompanied as it was mandatory on the part of the assessee. In this view of the matter, the assessee was asked by the AO to explain as to why the assessee s status should not be taken as AOP. However, the assessee vide its le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Thus the AO in view of the above deliberations observed that assessee s claim of the status as firm is not tenable in the eyes of law and the AO after rejecting the claim of status as firm has taken the status of the assessee as AOP as per Act and disallowed the claim of interest and remuneration of two partners of ₹ 7,02,094 + ₹ 1,21,412 = ₹ 8,23,506/-. 3.2 The assessee preferred first appeal before the ld. CIT(A) who has directed the AO to treat the assessee as partnership firm and allow the remuneration to the partners and interest to capital to partners by observing as under:- 4.12 The AO treated the assessee as AOP as the assessee failed to submit certified copy of partnership deed alongwith re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled along with the return of income or whether the same could be filed before the AO before he concludes the assessment proceedings. It is noted that the above issue is squarely covered by the decision of coordinate Bench in the case of Ishar Das Sahni Sons vs. DCIT, 77 ITD 256 (Del), wherein it has been held as under:- As per the amended provision of Section 184 the requisite condition for assessment as a firm are as under :- (1) the partnership is evaded by an instrument [s.184(1)(i)]. This condition is identical with the condition as prescribed in pre-1993 s. 184(i)(ii). The individual shares of the partners are specified in the instrument [s. 184(i)(ii)]. This condition is a reproduction of s. 184(i)(ii) of pre-1993 Section. (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the completion of the assessment and the uncertified and certified copies are found to be identical. Doing so would be taking a too technical view of the legal requirement. It is well settled that in interpreting the law, one of the factors to be taken into account is the purpose for which the law has been laid down. The words of a statute take their colour from the object behind it. The object of section 184(2) is to ensure that only the properly constituted firms are assessed as firms and as long as this objective is fulfilled before the assessment is finalised, the purpose of the statute is served. Hence, denying the status of firm to the assessee in the instant case merely on the ground that the certified copy of the partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue who after considering the arguments of both the parties restricted the addition to the extent of ₹ 31,336/- by observing as under:- 4.42. 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, in my opinion, the disallowance has to be reasonable. In my view, a disallowance of ₹ 50,000/- is reasonable. The Assessing Officer is direct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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