COMMISSIONER OF INCOME TAX I vs. M/S LALJIT HOSIERY
What did the High Court hold?
The Tribunal held that the requirement of filing a certified copy of the partnership deed along with the return of income is directory and not mandatory. It relied on the Full Bench judgment of the Punjab and Haryana High Court in CIT vs. Punjab Financial Corporation (supra), which held that the filing of an audit report along with the return is directory, and an assessee cannot be deprived of benefits if it is filed before the finalization of assessment. In the present case, the assessee furnished the certified copy of the partnership deed during the assessment proceedings. The Tribunal noted that the status of being assessed as a firm was allowed in preceding and succeeding years, based on the amended instrument filed before the AO in the year under appeal. Therefore, once the certified copy of the amended partnership deed was available with the AO before the completion of assessment proceedings, the benefit of being assessed in the status of a firm was to be allowed. Consequently, the deduction claimed on account of interest and salary paid to partners was to be allowed. The Tribunal upheld the CIT(A)'s order and dismissed the Revenue's appeal.
What were the facts?
The Revenue (Commissioner of Income Tax-I, Ludhiana) appealed against an order of the Income Tax Appellate Tribunal (Chandigarh Bench 'A') dated July 29, 2010, for assessment year 2005-06. The assessee, M/s Laljit Hosiery, Ludhiana, filed its return of income declaring Rs. 3,68,440. The Assessing Officer (AO) assessed the assessee as an Association of Persons (AOP) instead of a firm, disallowing deductions for salary and interest paid to partners amounting to Rs. 8,08,671. This was because the assessee failed to furnish a certified amended partnership deed along with the return, violating Section 184(4) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) [CIT(A)] allowed the assessee's appeal, noting that the certified copy of the partnership deed was filed during assessment proceedings, and deleted the additions. The Tribunal affirmed the CIT(A)'s order.
What were the issues?
1. Whether on the facts and in law, the Tribunal has challenged the constitutional validity of Section 184(4) of the Income Tax Act, 1961, by holding that the requirement of furnishing a certified copy of the partnership deed with the return is directory and not mandatory, despite the section stating it is required when changes occur. The Revenue argued that Section 184(4) clearly mandates furnishing a certified copy of the revised instrument of partnership along with the return for assessment year relevance. 2. Whether on the facts and in law, the Tribunal erred in relying on the Punjab and Haryana High Court decision in CIT vs. Punjab Financial Corporation, 254 ITR 6 (P&H) (Full Bench), as the issues are entirely different. The Revenue contended that the cited precedent was not applicable to the facts of the case. The assessee's arguments are not explicitly recorded, but their success implies they argued that filing the deed during assessment proceedings was sufficient compliance.
Which sections of the Income-tax Act were involved?
Section 184(4),Section 143(3)
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Cause title — parties, addresses and appearances
order noticed that the assessee had filed, the certified copy of the partnership deed during the assessment proceedings before the assessing - officer and the claim of. the assessee to be assessed as Firm was accepted. The addition of the amoun~ of interest of Rs. 6,86,671/- and salary of Rs. 1,20,0001- paid to the partners was, thus, deleted.
The Revenue preferred appeal impugning the order of the , CIT(A). The Tribunal put its seal of affirmation on the findings of the CIT(A) and consequently dismissed the appeal.
We have heard le'a'rned counsel for the appellant-rev~nue and have perused the record. . i
The point for determination in this case is,Iwhether non- I filing of a certified copy of the partnership deed along ~ith the return I Ii would be fatal and it violates the provisions of Section! 184(4) of the- Act and consequently dis-entitles the assessee to claim'registration of the firm? 8. -The Tribunal while allowing the plea of the assessee relied on a Full Bench. judgment of this Court in CIT vs. p'unjab , Financial Corporation, 254 ITR 6 (P&H) wherein non-filing 'of audit report along with the return was held to be directory and not 167 of 2011 4 /ribunal held that the assessee could not be denied istration where certified copy of the partnership deed fil~ during the course of the assessment proceedings 'he finding recorded by the Tribunal in this'behalf in,para Nos. a90t the order is as under:
"
The Hon'ble. Punjab and Haryana High Courj: in CIT , , vs. Punjab Financial Corporation (supra) has held that the filing of audit report along with the return of income 0 :r: C!)- :r:«z ~tt:«J: C Z« CC«-,z ::Ja. cannot be treated as mandatory and the assessee cannot be deprived of the benefits of deduction if the same ' is filed before the finalization of the assessment.
In the facts of the present case" the assessee had furnished the certified copy of the partner$hip deed during the course of assessment proceedings. The status of being assessed as firm is being allowed to the assessee in the preceding year i.e. assessment year 2004-05 and the same is also allowed to the assessee in the I, succeeding years i.e. assessment yearsl 2006-07 and 2007-08, vide order passed u/s 143(3) of\the Act. The , assessee further explained that the status! of firm in the , ' succeeding year is claimed on the basis of the amended instrument of partnership filed before the Assessing Officer in the year under appeal. , In the facts and the circumstances of the present case, we are of the' view that once the certified copy of amended partnership deed is available with the AO before completion of the assessment proceeding, the benefit of being assessedin
al No. 167 of 2011 ,5 status of the firm is to be allowed. Respectfully following the ratio laid down by the coordinate Bench of , the Tribunal, we. uphold the order of the CIT(A) in . directing the Assessing Officer to assess -the assessee in the status of firr)
Consequently, the deduction cl~imed on account of interest and salary paid to the partners is to be allowed. The grounds raised by the Revenue, are I- oCt: :J 0 U :I: C)-:I: <C z ~ ~ <C :I: Cz <C aJ <C,z :::::>c. thus, dismissed.
No perversity or illegality could be pointed out by ths learned counsel for the appellant in the finding recorded by the CIT(A)reversing the order of the assessing officer,whereby the claim of the assessee for assessment as a firm and deduction on account of salary and interest paid to the partners had been disallowed, and , , also in the order of the Tribunal whereby the finding ofthe CIT(A)was affirmed. No substantial question of law, thus, arises for consideration of this Court.
In view of the above, the appeal is dismissed. I July 7, 2011 *rkmalik*
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