9911796707
TMI Blog2002 (12) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,40,796 made by the AO on account of disallowances of interest paid to partners and has failed to appreciate that the change in the rate of interest has not been authorised in the partnership deed." 2. Ground No. 1 relates to the status of the firm, which the AO considered as AOP instead of registered firm while the learned CIT(A) directed the AO to assess the assessee in the status of firm and not as AOP. In this case, the assessee claimed the status of the firm but the AO adopted the status as AOP observing that in accordance with the amended law applicable from the asst. yr. 1993-94, the assessee was required to file a certified copy of the instrument of the partnership accompanying the return of income, which the assessee had failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year then it should have been continued to be so assessed for every subsequent year if there was no change in its constitution or in the shares of the partners as per the deed of the partnership on the basis of which it was first assessed in the status of the firm. It was further stated that the copy of partnership deed was only a procedural requirement but in the assessee's case, the deed was already there with the Department. The learned CIT(A) after considering the submissions of the assessee directed the AO to treat the status of the assessee as a firm by observing as under: "2.3 I have considered the facts of the case and submissions of the learned counsel. I agree with the submissions of the learned counsel that sub-s. (2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted status of the firm from the very beginning when the partnership deed was filed for the asst. yr. 1974-75, and this status continued till the asst. yr. 1992-93. It is also not doubted at any stage that there was any change in the partnership deed originally filed by the assessee for the asst. yr. 1974-75. In our view, the learned CIT(A) was justified in stating that the provisions of s. 184(3) were applicable to the facts of the assessee's case. Sec. 184(3) states as under: "184(3). Where a firm is assessed as such for any assessment year, it shall be assessed in the same capacity for every subsequent year if there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of s. 40(b)(iv) of the Act. 7. After considering the rival submissions, we find that the learned CIT(A) has correctly appreciated the facts of the present case. In this case, the partners were paid interest @ 6 per cent from the asst. yr. 1974-75 to asst. yr. 1982-83 and thereby by mutual consent of the partners as provided in cl. 4 of the partnership deed interest was paid @ 24 per cent from the asst. yrs. 1983-84 to 1985-86. The rate was subsequently reduced to 21 per cent from the asst. yr. 1986-87. The Department has not questioned the payment of interest to partners in the past. However, in this year, the AO has denied the benefit of interest on the ground that the rate of interest was not authorised by the partnership deed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest has been charged @ 18 per cent, which was in accordance with the limit prescribed under the provisions of s. 40(b)(iv) of the Act. The relevant provision states that the following amount shall not be deducted for and from the asst. yr. 1993-94 in computing the income chargeable under the head "Profits and gains of business or profession": "any payment of interest to any partner which is authorised by, and is in accordance with, the terms of partnership deed and relates to any period falling after the date of such partnership deed insofar as such amount exceeds the amount calculated at the rate of eighteen per cent simple interest per annum." Thus, there is no doubt that the payment of interest to the partners has been authorised by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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