Tribunal upholds firm status for assessee without partnership deed, dismisses Revenue's appeals

The Tribunal upheld the CIT(A)'s decision to grant firm status to the assessee despite not submitting a certified copy of the partnership deed with the return of income. The status as a firm was maintained, leading to the dismissal of the disallowance of interest and remuneration paid to partners. Additionally, the disallowance of telephone expenses was restricted to a portion deemed unrelated to the business, with the Tribunal affirming the CIT(A)'s decision. The Revenue's appeals on all issues were dismissed, and the decision was rendered on 16/10/2015.

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Issues:
1. Claim of status as a firm without furnishing a certified copy of partnership deed.
2. Disallowance of interest and remuneration paid to partners.
3. Disallowance of telephone expenses.

Analysis:

Issue 1: Claim of status as a firm without furnishing a certified copy of partnership deed
The Revenue challenged the CIT(A)'s decision to grant firm status to the assessee despite not submitting a certified copy of the partnership deed with the return of income as required by Section 184(2) of the Income Tax Act, 1961. The AO contended that the lack of the certified copy rendered the claim invalid, leading to the status being treated as AOP. However, the CIT(A) relied on precedents and held that filing the certified copy during assessment proceedings was sufficient. Citing the case of Ishar Das Sahni & Sons vs. DCIT, the Tribunal upheld the CIT(A)'s decision, emphasizing that the purpose of the law was fulfilled by submitting the document before the assessment was finalized. Therefore, the status of the assessee as a firm was upheld, and the disallowance of interest and remuneration was dismissed.

Issue 2: Disallowance of interest and remuneration paid to partners
The AO disallowed the claim of interest and remuneration paid to partners amounting to Rs. 8,23,506 due to the status being treated as AOP. However, the CIT(A) directed the AO to treat the assessee as a partnership firm, allowing the remuneration and interest to partners. The Tribunal, following the decision in Ishar Das Sahni & Sons vs. DCIT, upheld the CIT(A)'s order, stating that the assessee complied with Section 184(2) requirements. Consequently, the disallowance was not justified, and the amounts should be allowed in the hands of the firm. Hence, the Revenue's grounds on this issue were dismissed.

Issue 3: Disallowance of telephone expenses
The AO disallowed a portion of telephone expenses claimed by the assessee, stating they were not related to the business and were not in the name of the assessee or installed on business premises. The CIT(A) restricted the disallowance to Rs. 31,366 out of Rs. 81,336, considering the primary use of telephones. The Tribunal concurred with the CIT(A)'s decision, finding it reasonable and sustained the restriction. Consequently, the Revenue's appeal was dismissed, and the decision was pronounced on 16/10/2015.

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