TaxTMI 
TaxTMI 
TaxTMI 
2008 (1) TMI 260
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.... 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, 1961? 2. Whether on the facts and circumstances of the case, the Ld. ITAT was right in law in implying that interest and salary to members of an Association of Persons (AOP) were admissible, keeping in view the provisions of section 184(5) of the Income Tax Act, 1961 even as they stood prior to amendment by the Finance Act, 2003, with effect from 1.4.2004? 3. Whether on the facts and circumstances of the case, the Ld. ITAT was right in....
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....titled 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 of sub-section (5) Section 184 of the Act. The AO observed that since this was a mistake apparent from record, the same required to be rectified. Accordingly, the AO issued a notice under Section 154 on 17.10.2002 proposing to rectifiy the order under Section 154 and to treat the status of the assessee as an AOP, in consequence thereof to disallow interest and salary paid to partners. The AO issued show cause notice on 17.10.2002. In response to the....
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....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 not take into account the provisions of sub-section (5) of Section 184 of the Act then 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 deduciton 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 ....
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....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 partners. The specific provision for disallowing salary and interest paid to partner in a case where assessment has been completed u/s 144 has been made applicable only w.e.f. 1.4.2004 by way of an amendment. Now whether the deduction of interest and salary paid to partners could be disallowed or not in a case where assessment was completed u/s 144 and more particularly where such claim of deduction has specifically been allowed by the Tribu....