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TMI Blog2008 (1) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... Akshay Bhan, for the respondent JUDGMENT The judgment of the court was delivered by Rakesh Kumar Garg, J . -1. The revenue has filed the present appeal under Section 260A of the Income-tax Act, 1961 challenging the order of the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar passed in ITA No.54(ASR) 2004 dated 19.9.2006 (Annexure P-6) which has allowed the appeal of the assessee for the assessment year 1996-97. It has raised the following substantial questions of law:- "1. Whether on the facts and circumstances of the case, the Ld. ITAT was right in law in implying that section 154(1A) of the Income Tax Act, 1961, which refers to an order passed u/s 154(1), also covers an order passed u/s 144 of the Income Tax Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of the assessee for deduction of interest and salary paid to partners. The revenue challenged the order of CIT(A) in appeal before the Tribunal. The ITAT vide its order dated 13.11.2003 (Annexure A-3) in ITA No.135/ASR/2000 for the assessment year 1996-97 upheld the order of the CIT(A) by relying on the judgement of Rajasthan High Court in the case of CIT Vs. Jain Construction Co. others(2002) 245 ITR 527 (Rajasthan) held that the assessee was entitled to deduction in salary and interest to the partners upto the limit specified in section 40(b) of the Act. 5. Subsequently, the AO noted that since the assessment was completed under Section 144 of the Act, the status of the firm was required to be taken as an AOP within the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. 7. Feeling aggrieved against the said order of the Commissioner of Income-tax (Appeals), the assesssee filed appeal before the Tribunal which was allowed by the Tribunal vide order dated 19.9.2006. The relevant part of the order of the Tribunal is as under:- "We have heard both the parties at some length and given our thoughtful consideration to the rival contentions, examined the facts, evidence and material placed on record. The undisputed facts of the case are that the assessment in this case was completed u/s 144 in the status of Registered firm. However, the assessee was not allowed deduction of interest and salary paid to partners because the income was computed by net profit rate of 12.5%. Admittedly, the AO did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO u/s 154 was illegal, bad in law and without jurisdiction and is liable to be quashed on this point itself. At the time of completing the assessment u/s 144 the AO did not take into account the provisions of Section 184(5) in a case where the assessment was made u/s 144 perhaps for the reason that even on merits, he did not allow deduction of interest and salary paid to partners. Nevertheless he completed the assessment in the status of Registered Firm. Even otherwise, we find that as per provisions of sub-section (5) of Section 184, then existing in the statute for the relevant asstt. year, the AO could assess the firm in the same manner as an AOP. However, there was no specific provision for disallowing salary and interest paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in existence as per which the firm was to be assessed in the manner as an A.O.P. It is also a fact that the issue for deduction of interest and salary paid to partner was subject matter of dispute both before the CIT(A) and the ITAT and the Tribunal vide its order dated 13.11.2003(supra) allowed the claim of the assessee for deduction of interest and salary paid to partners and upheld the order of the CIT(A). Thus, it can not be said that claim of the assessee for deduction of interest and salary paid to partners was not considered by the CIT(A) and the ITAT. 10. No doubt, the Tribunal while passing the order dated 13.11.2003 did not consider the claim of the assessee for deduction of salary and interest paid to the partners in the lig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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