M/S GRK AGENCIES, AMRITSAR V. INCOME TAX OFICER, WARD 5 (2), AMRITSAR

ITA 412/ASR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8514 (ITAT-AMRITSAR)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 18-02-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 27-06-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Question of law
• Section: 143(3); 40(b); 28; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. NO. 412/ASR/2018 AS SESSMENT YEAR: 2014-15 GRK AGENCIES, 39, CITY LIGHT CINEMA, PUTLIGHAR ROAD, CHHEHARTA, AMRITSAR [PAN: AAHFG 9717B] VS. THE INCOME TAX OFFICER, WARD 5(2), AMRITSAR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. VIPUL ARORA ( C.A.) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 18.02.2019 DATE OF PRONOUNCEMENT: 10.04.2019 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-2, AMRITSAR (' CIT(A)' FOR SHORT) DATED 17.05.2018, DISMISSING THE ASSESSEES APPEAL CONTES TING ITS ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) DATED 13.12.2016 FOR THE ASSESSMENT YEAR (AY) 2014-15. 2. THE ISSUE AT LARGE IN THE INSTANT CASE IS THE VA LIDITY IN LAW, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, OF THE DISALLOWANCE OF R EMUNERATION TO PARTNERS, CLAIMED IN THE SUM OF RS. 4,40,000 IN THE COMPUTATION OF IT S BUSINESS INCOME U/S. 28 BY THE ASSESSEE-FIRM FOR THE RELEVANT YEAR. THE REASON FOR THE DISALLOWANCE IS THAT THE SAME IS NOT ADMISSIBLE IN VIEW OF SECTION 40(B) OF THE ACT. THE PARTNERSHIP DEED ITA NO. 412/ASR/2018 (AY 2014-15) GRK AGENCIES V. ITO 2 DATED 05/6/2007, COPY OF WHICH WAS FURNISHED DURING THE ASSESSMENT PROCEEDINGS, PER CLAUSE 9 THEREOF, MENTIONS THAT THE SALARY TO P ARTNERS SHALL BE AS MUTUALLY AGREED BETWEEN THE PARTNERS. AS PER THE REVENUE, IN -AS-MUCH AS THE SAME DOES NOT EITHER QUANTIFY THE REMUNERATION TO BE ALLOWED TO T HE WORKING PARTNERS, SPECIFIED BY NAME, OR THE MANNER IN WHICH REMUNERATION THERET O IS TO BE QUANTIFIED, THE SAME DOES NOT SATISFY THE CONDITION OF SECTION 40(B), MA NDATORY IN NATURE, EVEN AS ALSO EXPLAINED BY THE BOARD CIRCULAR NO. 739 DATED 25.3. 1996. 3.1 SECTION 40(B) IN ITS RELEVANT PART READS AS UND ER: 40. AMOUNTS NOT DEDUCTIBLE. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION S 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, (A) IN THE CASE OF ANY ASSESSEE (B) IN THE CASE OF ANY FIRM ASSESSABLE AS SUCH, (I) ANY PAYMENT OF SALARY, BONUS, COMMISSION OR REM UNERATION, BY WHATEVER NAME CALLED (HEREINAFTER REFERRED TO AS REMUNERATION) TO ANY PARTNER WHO IS NOT A WORKING PARTNER; OR (II) ANY PAYMENT OF REMUNERATION TO ANY PARTNER WHO IS A WORKING PARTNER, OR OF INTEREST TO ANY PARTNER, WHICH, IN EITHER CASE, IS NOT AUTHORIS ED BY, OR IS NOT IN ACCORDANCE WITH, THE TERMS OF THE PARTNERSHIP DEED; OR (III) ANY PAYMENT OF REMUNERATION TO ANY PARTNER WH O IS A WORKING PARTNER, OR OF INTEREST TO ANY PARTNER, WHICH, IN EITHER CASE, IS AUTHORISED B Y, AND IS IN ACCORDANCE WITH, THE TERMS OF THE PARTNERSHIP DEED, BUT WHICH RELATES TO ANY PERI OD (FALLING PRIOR TO THE DATE OF SUCH PARTNERSHIP DEED) FOR WHICH SUCH PAYMENT WAS NOT AU THORISED BY, OR IS NOT IN ACCORDANCE WITH, ANY EARLIER PARTNERSHIP DEED, SO, HOWEVER, TH AT THE PERIOD OF AUTHORISATION FOR SUCH PAYMENT BY ANY EARLIER PARTNERSHIP DEED DOES NOT CO VER ANY PERIOD PRIOR TO THE DATE OF SUCH EARLIER PARTNERSHIP DEED; OR (IV) ANY PAYMENT OF INTEREST TO ANY PARTNER ..; OR (V) ANY PAYMENT OF REMUNERATION TO ANY PARTNER WHO IS A WORKING PARTNER, WHICH IS AUTHORISED BY, AND IS IN ACCORDANCE WITH, THE TERMS OF THE PARTNERSHIP DEED AND RELATES TO ANY PERIOD FALLING AFTER THE DATE OF SUCH PARTNERSHIP D EED IN SO FAR AS THE AMOUNT OF SUCH PAYMENT ITA NO. 412/ASR/2018 (AY 2014-15) GRK AGENCIES V. ITO 3 TO ALL THE PARTNERS DURING THE PREVIOUS YEAR EXCEED S THE AGGREGATE AMOUNT COMPUTED AS HEREUNDER: 3.2 THE ASSESSEE, IN THIS RESPECT, RELIES ON THE DE CISION BY THE TRIBUNAL IN ASST. CIT V. SUMAN CONSTRUCTIONS [2009] 20 DTR 450 (TRIB)(PUNE)(COPY ON RECORD). THE TRIBUNAL PER THE SAME HAS HELD THAT THE WORDS IN ACCORDANCE WITH OCCURRING IN SECTION 40(B) CANNOT BE CONSTRUED TO IMPLY QUANTIF ICATION OR THE MANNER OF QUANTIFICATION OF THE REMUNERATION, AS INTERPRETED BY THE BOARD PER ITS CIRCULAR NO. 739 SUPRA, WHICH HAS, IN SO INTERPRETING THE PR OVISION, TRAVELED BEYOND THE SCOPE OF THE WORDS IN ACCORDANCE WITH IN SECTION 40(B). BOARD CIRCULARS, IT IS WELL-SETTLED, EVEN AS THEY MAY BIND THE REVENUE AUT HORITIES, ARE NOT BINDING ON THE APPELLATE AUTHORITIES. FURTHER, THE LD. COUNSEL FOR THE ASSESSEE, SH. ARORA, WOULD, ON A QUERY BY THE BENCH, CLARIFY THAT AN AMENDMENT TO THE PARTNERSHIP DEED IS NOT REQUIRED TO BE REGISTERED WITH THE REGISTRAR OF FIR MS & SOCIETIES. THE RESOLUTION AS ON 01.4.2013, INCREASING THE SALARY OF BOTH THE PAR TNERS, NAMELY, VIKRAM KUNDRA AND GAUTAM KUNDRA , FROM RS.1.20 LACS PER ANNUM EACH (VIDE RESOLUTION DATED NOT SPECIFIED), TO RS.2.20 LACS PER ANNUM EACH, DES PITE BEING NOT REGISTERED UNDER PARTNERSHIP LAW, IS, THUS, VALID IN LAW. TWO, ON BE ING ASKED ABOUT ANY CONTEMPORANEOUS RECORD EXHIBITING THAT THE SALARY W AS INDEED ENHANCED ON 01.4.2013, I.E., THE DATE FROM WHICH IT IS MADE EFF ECTIVE THE SAID RESOLUTION BEING RECORDED ON THE LETTER-HEAD OF THE FIRM, WITH IN FACT THE PARTNERS SIGNING THE SAME (I.E., THE RESOLUTION AS ON 01/4/2013) HAVING NOT P UT ANY DATE ALONGSIDE THEIR SIGNATURE , SH. ARORA WOULD FURNISH THE CAPITAL ACCOUNT OF BO TH THE PARTNERS (COPY ON RECORD). THE SAME BEAR CREDIT (FOR SALARY) TO TH E CAPITAL ACCOUNT OF THE PARTNERS AT RS.15,000 PER MONTH (FOR THE FIRST FOUR MONTHS) AND AT RS.20,000 PER MONTH THEREAFTER. THIS, IN HIS VIEW, WOULD SHOW THAT THE RESOLUTION INCREASING THE SALARY WAS INDEED PASSED ON 01.4.2013, AND THE SAID RESOLU TION IS NOT BACK-DATED. IN FACT, THE SALARY PRIOR TO ITS INCREASE, SH. ARORA WOULD CONTINUE, WAS AT RS.1.20 LACS PER ITA NO. 412/ASR/2018 (AY 2014-15) GRK AGENCIES V. ITO 4 ANNUM FOR BOTH THE PARTNERS AND, ACCORDINGLY, CREDI TED TO THE PARTNERS ACCOUNT IN THAT SUM. THE ASSESSING OFFICER (AO), HOWEVER, HAS NOT EVEN ALLOWED THE SAME. FURTHER, AGAIN IN RESPONSE TO A QUERY BY THE BENCH, HE WOULD, WITH REFERENCE TO SECTION 10 OF THE INDIAN CONTRACT ACT, 1872 SUBMIT THAT THERE IS NO REQUIREMENT THEREIN FOR WITNESSING A CONTRACT. AS SUCH, THE NON -SIGNING OF THE RESOLUTION PASSED ON 01.4.2013, OR THE EARLIER ON THE RESOLUTION DATE D (NOT SPECIFIED), BY ANY WITNESS, DOES NOT BREACH EITHER THE CONTRACT ACT OR THE PART NERSHIP ACT. 3.3 THE LD. DEPARTMENTAL REPRESENTATIVE (DR), SH. C HARAN DASS, WOULD ON THE OTHER HAND SUBMIT THAT THE RESOLUTION, SAID TO BE P ASSED ON 01.4.2013, IS CLEARLY AN AFTERTHOUGHT. WHY, THE SAME WAS NOT FURNISHED BY TH E ASSESSEE EVEN ALONG WITH THE PARTNERSHIP DEED DATED 05/6/2007 SUBMITTED TO THE A O DURING ASSESSMENT PROCEEDINGS. IT WAS ONLY WHEN THE AO, ON THE PERUSA L OF THE PARTNERSHIP DEED FURNISHED, ENQUIRED OF THE BASIS OF THE DEBIT OF TH E PARTNERS SALARY IN THE PARTNERSHIP ACCOUNTS, THAT THE ASSESSEE SUBMITTED T HE COPY OF THE RESOLUTION ON ITS LETTER-HEAD, WHICH CANNOT BE IN ANY CASE REGARDED A S A PART OF THE PARTNERSHIP DEED. THE BOARD CIRCULAR CORRECTLY EXPLAINS THE LEGISLATI VE INTENT, I.E., THAT ONLY SALARY IN TERMS OF THE PARTNERSHIP DEED COULD BE VALIDLY ALLO WED BY THE PARTNERSHIP AND, FURTHER, ALLOWED IN COMPUTING ITS BUSINESS INCOME, SUBJECT OF COURSE TO THE LIMIT STIPULATED U/S. 40(B)(V). 4. I HAVE HEARD THE PARTIES, AND PERUSED THE MATERI AL ON RECORD. 4.1 THE FIRST QUESTION THAT ARISES AND, THEREFORE, IS TO BE ANSWERED, IS IF THE RELEVANT CLAUSE OF THE PARTNERSHIP DEED DATED 05/6/ 2007, IN PURSUANCE OF WHICH THE PARTNERS ARE SAID TO HAVE PASSED A RESOLUTION EARLI ER (DATE NOT SPECIFIED), FIXING THE SALARY OF BOTH THE PARTNERS AT RS.1.20 LACS PER ANN UM EACH, AND WHICH STANDS ITA NO. 412/ASR/2018 (AY 2014-15) GRK AGENCIES V. ITO 5 FURTHER ENHANCED, W.E.F. 01.4.2013, TO RS.2.20 LACS PER ANNUM EACH, IS A VALID CLAUSE. THE RELEVANT CLAUSE OF THE PARTNERSHIP DEED (AT PB PGS. 1-2) READS AS UNDER: THE SALARY/REMUNERATION BE PAID EVERY MONTH/YEAR A S MAY BE MUTUALLY AGREED BETWEEN THE PARTNERS FROM TIME TO TIME. THE PARTNERS MAY AGREE TO CHANGE THE QUANTUM OF THE SALARY/REMUNERATION BY A SEPARATE AGREEMENT OR SUPP LEMENTARY DEED. THE SAME, AS APPARENT, IS NOT AN AGREEMENT FOR A PA RTICULAR SUM, EITHER FIXED OR VARIABLE, AS WITH REFERENCE TO THE PROFITS OF THE F IRM, AS REMUNERATION TO THE PARTNERS, NOR DOES IT SPECIFY AS TO WHO OF THE TWO PARTNERS, I.E., BY NAME, OR BOTH THE PARTNERS, SHALL BE THE WORKING PARTNER/S. THE ASSES SEE ITSELF AGREES TO THIS, AND WHICH EXPLAINS THE NEED TO PASS A RESOLUTION/S SPEC IFYING THE AMOUNT OF SALARY AS WELL AS THE PARTNERS TO WHOM IT IS PAYABLE, AND WHI CH IS STATED TO HAVE BEEN PASSED, IN MODIFICATION OF AN EARLIER RESOLUTION, ON 01.4.2 013, I.E., THE FIRST DAY OF THE RELEVANT PREVIOUS YEAR. IN OTHER WORDS, IT IS AN AG REEMENT AGREEING TO PAY SALARY, AND NOTHING MORE. THAT IS, IT COULD AT BEST BE REGA RDED AS AN AUTHORIZATION BY THE PARTNERSHIP TO PAY SALARY TO THE PARTNERS. I SAY, AT BEST, AS IT IS EQUALLY VALID TO CONTEND THAT THE AUTHORIZATION HAS TO BE QUA BOTH, I.E., THE PARTNER/S TO WHOM, AND THE SUM AT WHICH, SALARY IS TO BE ALLOWED BY THE PA RTNERSHIP, AND AN AUTHORIZATION WHEREIN ANY OF THESE ELEMENTS IS MISSING CANNOT BE REGARDED AS A PROPER AUTHORIZATION, OR ONE AS CONTEMPLATED BY SECTION 40 (B)(II). THE SAID PROVISION, HOWEVER, BY INCLUDING THE WORDS IN ACCORDANCE WITH IN CONJUNCTION WITH THE WORDS AUTHORIZED BY IN SECTION 40(B)(II), REMOVES ANY AMBIGUITY IN LAW, MAKING THE DISCUSSION OR DEBATE ON THE SCOPE OF THE WORDS AUTHORIZED BY REDUNDANT. IT COULD BE ARGUED THAT THE WORDS AUTHORIZED BY IN S ECTION 40(B)(II) ARE TO BE READ BROADLY, SIGNIFYING THAT THE REMUNERATION FOR THEIR SERVICES IS TO BE PAID TO THE WORKING PARTNERS. THIS IS AS THE SAME IS ESSENTIALL Y A PART OF THE PROFIT OF THE FIRM, WHICH IS TO BE APPROPRIATED BETWEEN THE PARTNERS, A ND THE SALARY CLAUSE ONLY MODIFIES THE SAID APPROPRIATION TO THAT EXTENT, IN- AS-MUCH AS IT IS TO BE CHARGED, AS ITA NO. 412/ASR/2018 (AY 2014-15) GRK AGENCIES V. ITO 6 AGREED TO, PRIOR TO THE PROFIT BEING SHARED IN THE DEFINED RATIO, AGAIN, AS AGREED TO, IMPLIES AN AGREEMENT APRIORI. HOWEVER, AS AFORE-STA TED, THE WORDS IN ACCORDANCE WITH LEAVES ONE IN NO MANNER OF ANY DOUBT THAT THE IDENTIFICATION OF THE PARTNER/S AND THE QUANTIFICATION OF REMUNERATION, IS A PREREQ UISITE FOR DEDUCTION. HOW ELSE, ONE MAY ASK AND, RATHER, EVEN WITHOUT THE WORDS IN ACCORDANCE WITH, SALARY ALLOWED, WHICH HAS, TO CONSTITUTE A PROPER CHARGE T O THE PROFITS OF THE FIRMS, BE SPECIFIC BOTH QUA THE PERSON AND THE AMOUNT. AND ONLY THE BALANCE PR OFIT, I.E., AFTER PROVIDING FOR THE REMUNERATION AND/OR INTEREST, IF ANY, SIMILARLY AUTHORIZED, OR, AS THE CASE MAY BE, LOSS, APPROPRIATED BETWEEN THE PAR TNERS. IN SUM, THE REMUNERATION BEING A PART OF THE PROFIT OF THE FIRM, AGREED TO B E ALLOWED TO THE WORKING PARTNER/S, THE MANNER IN WHICH IT IS TO BE, EVEN IF NOT AT A C ONSTANT AMOUNT, BUT WITH REFERENCE TO THE PROFIT OF THE FIRM, IS TO BE WELL DEFINED. T HE BOARD CIRCULAR (SUPRA), REPRODUCED AS UNDER, THUS, EXPLAINS THE PROVISION C ORRECTLY: ' CIRCULAR NO. 739, DT. 25TH MARCH, 1996 SUBJECT: PROVISIONS OF S. 40(B)(V) OF THE IT ACT, 1 961, REGARDING ADMISSIBILITY OF REMUNERATION OF WORKING PARTNER IN THE ASSESSMENT O F FIRMSREGARDING. THE BOARD HAVE RECEIVED REPRESENTATIONS SEEKING CLA RIFICATION REGARDING DISALLOWANCE OF REMUNERATION PAID TO THE WORKING PARTNERS AS PROVID ED UNDER S. 40(B)(V) OF THE IT ACT. IN PARTICULAR, THE REPRESENTATIONS HAVE REFERRED TO TW O TYPES OF CLAUSES, WHICH ARE GENERALLY INCORPORATED IN THE PARTNERSHIP DEEDS. THESE ARE : (I) THE PARTNERS HAVE AGREED THAT THE REMUNERATION TO A WORKING PARTNER WILL BE THE AMOUNT OF REMUNERATION ALLOWABLE UNDER THE PROVISIONS OF S. 4 0(B)(V) OF THE IT ACT, AND (II) THE AMOUNT OF REMUNERATION TO WORKING PARTNER WILL BE AS MAY BE MUTUALLY AGREED UPON BETWEEN PARTNERS AT THE END OF THE YEAR. IT HAS BEEN REPRESENTED THAT THE AOS ARE NOT ALLOWI NG DEDUCTION ON THE BASIS OF THESE AND SIMILAR CLAUSES IN THE COURSE OF SCRUTINY ASSESSMEN TS FOR THE REASON THAT THEY NEITHER SPECIFY THE AMOUNT OF REMUNERATION TO EACH INDIVIDUAL NOR L AY DOWN THE MANNER OF QUANTIFYING SUCH REMUNERATION. ITA NO. 412/ASR/2018 (AY 2014-15) GRK AGENCIES V. ITO 7 2. THE BOARD HAVE CONSIDERED THE REPRESENTATIONS. S INCE THE AMENDED PROVISIONS OF S. 40(B) HAVE BEEN INTRODUCED ONLY WITH EFFECT FROM THE ASST . YR. 1993-94 AND THESE MAY NOT HAVE BEEN UNDERSTOOD CORRECTLY THE BOARD ARE OF THE VIEW THAT A LIBERAL APPROACH MAY BE TAKEN FOR THE INITIAL YEARS. IT HAS BEEN DECIDED THAT FOR THE ASST. YRS. 1993-94 TO 1996-97 DEDUCTION FOR REMUNERATION TO A WORKING PARTNER MAY BE ALLOWED ON THE BASIS OF THE CLAUSES OF THE TYPE MENTIONED AT 1(I) ABOVE. 3. IN CASES, WHERE NEITHER THE AMOUNT HAS BEEN QUAN TIFIED NOR EVEN THE LIMIT OF TOTAL REMUNERATION HAS BEEN SPECIFIED BUT THE SAME HAS BE EN LEFT TO BE DETERMINED BY THE PARTNERS AT THE END OF THE ACCOUNTING PERIOD, IN SUCH CASES PAYMENT OF REMUNERATION TO PARTNERS CANNOT BE ALLOWED AS DEDUCTION IN THE COMPUTATION OF THE F IRMS INCOME. 4. IT IS CLARIFIED THAT FOR THE ASSESSMENT YEARS SU BSEQUENT TO THE ASST. YR. 1996-97, NO DEDUCTION UNDER S. 40(B)(V) WILL BE ADMISSIBLE UNLE SS THE PARTNERSHIP DEED EITHER SPECIFIES THE AMOUNT OF REMUNERATION PAYABLE TO EACH INDIVIDUAL W ORKING PARTNER OR LAYS DOWN THE MANNER OF QUANTIFYING SUCH REMUNERATION. 5. THE ABOVE CLARIFICATION MAY BE BROUGHT TO THE NO TICE OF ALL THE AOS OF YOUR REGION. SD/- NISHI SINGH, SECRETARY, CBDT [F. NO. 225/29/93/ITA-II] PARA 4 IS APPLICABLE FOR THE CURRENT YEAR, BEING AN ASSESSMENT YEAR AFTER AY 1996- 97. IN FACT, EVEN FOR EARLIER YEARS IT IS ONLY A C LAUSE, OF THE TYPE AS STATED AT PARA 1(I), THAT COULD BE REGARDED AS MEETING THE REQUIRE MENT OF LAW, AND NOT THAT PER PARA 1(II), AS OBTAINS IN THE INSTANT CASE. 4.2 THE ASSESSEE HAS BEFORE ME PLACED RELIANCE ON T HE DECISION IN SUMAN CONSTRUCTIONS (SUPRA). THE SAME HAS TO BE REGARDED AS MISPLACED AS THE SAID BOARD CIRCULAR HAS BEEN, ON A CHALLENGE THERETO (IN WP NO . 3765 OF 1997), UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT ON 05.10.2011 IN SOOD BHANDARI & CO. V. CBDT , REPORTED AT [2012] 204 TAXMAN 340 (P&H). IN FACT, AS THE QUESTION OF LAW RAISED BEFORE THE HONBLE COURT WOULD SHOW; IT ALSO DECIDING A BUNCH OF APPEALS ALONG WITH, THE DISALLOWANCE OF SALARY TO PARTNERS WAS UPHELD EVEN WHERE MADE BY WAY OF AN ADJUSTMENT U/S.143(1)(A) IN-AS-MUCH AS TH E SAME WAS CLEARLY ITA NO. 412/ASR/2018 (AY 2014-15) GRK AGENCIES V. ITO 8 INADMISSIBLE WHERE THE SALARY, AS CLAIMED, WAS IN P URSUANCE OF A CLAUSE OF THE TYPE STATED AT PARA 1(II) OF THE BOARD CIRCULAR (SUPRA), I.E., TO WHICH TYPE CLAUSE 9 OF THE PARTNERSHIP DEED IN THE INSTANT CASE BELONGS. CLAUSE 9 ENVISAGES AN AGREEMENT AS TO THE AMOUNT OF SALARY TO BE ALLOWED TO THE PARTNERS, AND TOWARD WHICH THE ASSESSEE RELIES ON THE RESOLUTION AFORE-REFERRED, WHICH ACCO RDINGLY STANDS CONSIDERED IN THE ENSUING PART OF THIS ORDER. 4.3 THE NEXT QUESTION THAT ARISES IS IF THE RESOLUT ION, STATED TO BE PASSED ON 01.4.2013, CAN BE REGARDED AS A PART OF THE PARTNER SHIP DEED, I.E., A SUPPLEMENTARY OR REVISED DEED, AMENDING THE ORIGINAL PARTNERSHIP DEED TO THAT EXTENT FROM THAT DATE. THE SAME BEING NOT STAMPED, MUCH LESS PROPERL Y, NOR REGISTERED, HAS NOT BEEN REGARDED AS VALID; RATHER, AS AN AFTERTHOUGHT, BY T HE REVENUE. THE ISSUE, BEFORE GOING INTO THE TECHNICAL QUESTION AS TO IF IT COULD IN LAW BE REGARDED AS A VALID PARTNERSHIP DEED, I.E., IF IT WOULD QUALIFY AS ONE, IS OF THE GENUINENESS OF THE DOCUMENT, SERIOUSLY DOUBTED BY THE REVENUE, AND, IN MY CONSIDERED VIEW, RIGHTLY SO. THERE IS NOTHING TO SHOW THAT IT WAS PASSED ON 01.4.2013 ITSELF. THE DATE ASSUMES SIGNIFICANCE AS A PARTNERSHIP, BY DEFINITIO N, IS AN AGREEMENT BETWEEN TWO OR MORE PERSONS TO CARRY ON BUSINESS, SEVERALLY OR JOINTLY, AGREEING TO SHARE THE PROFITS OR, AS THE CASE MAY BE, LOSSES OF THE PARTN ERSHIP IN A DEFINED RATIO. SUCH AN AGREEMENT HAS THEREFORE, PER FORCE THE NATURE OF THE CONTRACT, TO BE ARRIVED AT BEFOR E THE PARTNERSHIP IS FORMED. IN-AS-MUCH AS SALARY OR REMUNERATION TO A PARTNER IS A PART OF HIS SHARE IN THE PROFIT OF THE PARTNERSHIP, IT HAS TO BE, I.E., TO BE VALID, ARRIVED AT THE BEGINNING OF THE PERIOD FOR WHICH IT WOULD O BTAIN. THE REMUNERATION CLAUSE; SALARY BEING A CHARGE ON THE PROFITS OF THE FIRM AS PER THE PARTNERSHIP AGREEMENT, WOULD ALSO ACCORDINGLY REQUIRE CLARIFICATION AS TO THE AMOUNT OF SALARY, IF ANY, IN CASE OF ABSENCE OR INADEQUACY OF PROFIT, I.E., WHER E WITH REFERENCE TO A DEFINED RATIO OF PROFIT. CONTINUING OUR DISCUSSION WITH REGARD TO THE PRIMARY RELEVANCY OF THE ITA NO. 412/ASR/2018 (AY 2014-15) GRK AGENCIES V. ITO 9 DATE, THE SAME IS ALSO MANDATED BY LAW (SECTION 40( B) (III)), SO THAT IT IS NOT TENABLE TO SAY THAT THE SALARY CLAUSE WOULD OPERATE RETROSP ECTIVELY. FURTHER, BEING NEITHER STAMPED NOR REGISTERED, IT IS NOT ADMISSIBLE IN EVI DENCE IN A COURT OF LAW, I.E., AS A LEGALLY ENFORCEABLE CONTRACT. HOW COULD, THEN, THE REVENUE BE FAULTED FOR NOT GIVING COGNIZANCE TO SUCH A DOCUMENT? IT MAY BE ARG UED THAT IT COULD BE STAMPED AND REGISTERED AT ANY TIME IN FUTURE, RENDERING AS IT ADMISSIBLE FOR THE PERIOD PRIOR THERETO. THE ARGUMENT WOULD REQUIRE BEING EXAMINED WITH REFERENCE TO THE RELEVANT PROVISIONS/STATUTES, ONLY WHEREUPON IT COULD BE ANS WERED, TOWARD WHICH NO REFERENCE HAS THOUGH BEEN MADE. THE FACT OF THE MAT TER, NEVERTHELESS, IS THAT THE DOCUMENT HAS NOT BEEN STAMPED AND, FURTHER, BEING N OT STAMPED, IT COULD NOT BE REGISTERED. SUFFICE TO STATE THAT IT CANNOT, IN THE PRESENT FORM, BE REGARDED AS VALID, LEGALLY ENFORCEABLE CONTRACT. THE ARGUMENT IS IN FA CT OF NO CONSEQUENCE INASMUCH AS THERE IS NOTHING TO DEMONSTRATE OR PROVE THAT TH E DOCUMENT WAS INDEED EXECUTED ON 01/4/2013, WHICH DATE ASSUMES VITAL SIGNIFICANCE , BOTH IN THE CONTEXT OF THE PARTNERSHIP LAW AND THE INCOME-TAX LAW. EVEN AS EXP LAINED BY THE HONBLE JURISDICTIONAL HIGH COURT IN SOOD BHANDARI & CO. (SUPRA), THE PAYMENT OF SALARY AND INTEREST COULD NOT BE LEFT TO THE DISCRETION OF THE PARTNERS, TO BE DECIDED AT THE END OF THE YEAR. AS SUCH, THE QUESTION OF THE DATE FROM WHICH THE RESOLUTION IN-AS- MUCH AS THERE IS NOTHING TO EVIDENCE THE DATE OF IT S EXECUTION, BEING A REQUIREMENT OF BOTH, THE PARTNERSHIP LAW AS WELL AS S. 40(B) OF THE ACT, SO THAT THE STIPULATION AS TO REMUNERATION COULD ONLY OPERATE PROSPECTIVELY, C ONTINUES. IF INDEED THE SAME WAS, AS CONTENDED, PASSED ON 01.4.2013, WHY SHOULD THE ASSESSEE, A REGISTERED FIRM (WITH THE REGISTRAR OF FIRMS AND SOCIETIES), NOT FI LE THE SAME BY WAY OF A SUPPLEMENTARY DEED WITH THE SAID OFFICE QUA WHICH THE ASSESSEE WAS SPECIFICALLY QUESTIONED. THERE IS NO MERIT IN THE ARGUMENT THAT WHILE A PARTNERSHIP DEED IS TO BE REGISTERED, THE AMENDMENT THERETO IS NOT. THE MOOT QUESTION, RATHER, IS IF IT WOULD STAND TO BE REGISTERED IN ITS PRESENT FORM, ANSWER TO WHICH IS AN EMPHATIC NO. ITA NO. 412/ASR/2018 (AY 2014-15) GRK AGENCIES V. ITO 10 AGAIN, IT WOULD SIMILARLY STAND TO BE FILED WITH TH E BANK/S AND THE VARIOUS OTHER AUTHORITIES AND GOVERNMENT AGENCIES WITH WHICH THE FIRM IS, AS A BUSINESS ENTITY, REGISTERED, I.E., APART FROM THE INCOME-TAX, VIZ., SALE-TAX, EXCISE, INDUSTRIES, POLLUTION, ETC. BEING AN AMENDMENT TO THE ORIGINAL PARTNERSHIP DEED, IT WOULD CONSEQUENTLY REQUIRE BEING FILED WITH THE RELEVANT AUTHORITIES, I.E., WHERE IT HAS BEEN ALREADY FILED, BEING IN FACT ONLY AS IT WAS IN LAW OBLIGED TO. THERE IS NOTHING ON RECORD TO SHOW, NOR EVEN A CONTENTION TO THAT EF FECT, OF IT BEING FILED WITH ANY OF THE AUTHORITIES. THE QUESTION OF WHETHER IT COULD B E VALIDLY FILED IN THE PRESENT FORM, CONTINUES, TO AGAIN THE SAME ANSWER IN-AS-MUC H AS IT CANNOT BE REGARDED AS A LEGALLY ENFORCEABLE CONTRACT. WHY, IT WAS NOT EVEN FILED BEFORE THE AO IN THE FIRST INSTANCE, AND IT IS ONLY ON BEING SPECIFICALLY QUES TIONED IN ITS RESPECT, I.E., QUA THE REMUNERATION CLAUSE, THAT THE ASSESSEE FURNISHED TH E SAME IN THE ASSESSMENT PROCEEDINGS. THE ASSESSEES CONDUCT, I.E., IN FIRST CONTINUING WITH AN IMPERMISSIBLE CLAUSE (IN THE PARTNERSHIP DEED) EVEN YEARS AFTER C LARIFICATION BY THE BOARD AND, THEN, IN NOT DEFINING THE MANNER OF QUANTIFICATION, BUT PASSING RESOLUTIONS, WITH NO RECORD AS TO THE TIME WHEN THEY WERE ACTUALLY PASSE D, STATING TO BE VALID AMENDMENT/S TO THE PARTNERSHIP AGREEMENT, ITSELF BE TRAYS ITS CASE OF HAVING PASSED THE RESOLUTIONS ON THE DATE FROM WHICH THEY ARE MAD E EFFECTIVE, I.E., PROSPECTIVELY. THE RESOLUTION/S ALSO DOES NOT QUALIFY THE TERM PA RTNERS WITH THE WORD WORKING, SO THAT IN TERMS THEREOF, THE SALARY IS TO BE PAID IRRESPECTIVE OF WHETHER A PARTICULAR PARTNER IS A WORKING PARTNER OR NOT, AND WHICH IS N OT SUSTAINABLE IN VIEW OF SECTION 40(B)(I). THE ENTRIES IN THE BOOKS OF ACCOUNT, EVEN OTHERWISE NOT DECISIVE OF THE MATTER, ALSO DO NOT SUPPORT THE ASSESSEES CASE. TH E SAID RESOLUTION, OR THE ONE STATED TO BE PASSED EARLIER THERETO, CANNOT, IN VIE W OF THE FORE-GOING FACTUAL AND LEGAL INCIDENTS, BE REGARDED AS A VALID PARTNERSHIP DEED, I.E., AS A VALID INSTRUMENT OF PARTNERSHIP, OR AS A VALID AMENDMENT TO THE PART NERSHIP DEED DATED 05.6.2007. ONE COULD ARGUE THAT EVEN IGNORING THE RESOLUTION/S THE TOTAL SALARY PROVIDED IN THE ITA NO. 412/ASR/2018 (AY 2014-15) GRK AGENCIES V. ITO 11 PARTNERSHIP ACCOUNTS COULD BE REGARDED AS AGREED TO BY THE PARTNERS, I.E., FROM TIME TO TIME. THE SAME IMPLIES THAT THERE IS NO NEED FOR A SEPARATE WRITTEN AGREEMENT, WHICH CANNOT BE ACCEPTED IN VIEW OF THE SAME BEING A REQUIREMENT OF LAW FOR A FIRM TO BE ASSESSED AS A FIRM (SS. 184, 185). 4.4 THE DECISION IN SUMAN CONSTRUCTIONS (SUPRA) AS WELL AS ITO V. KAKKAR COLD STORAGE [2004] 991 TTJ 722 (ASR) WHICH PERTAINS TO AY 19 93-94 (FOR WHICH EXCEPTION HAS BEEN MADE BY THE BOARD CIRCULAR (SUPR A) ITSELF), WOULD, ACCORDINGLY, BE OF NO CONSEQUENCE, AS WOULD BE THE ASSESSEES RE LIANCE ON DURGA DASS DEVKI NANDAN V. ITO [2012] 342 ITR 17 (HP) OR, FOLLOWING IT, BY THE TR IBUNAL IN CLASSIC LAW V. ASSTT. CIT (IN ITA NO. 340/DEL/2016, DATED 15.01.2018) WOULD BE OF LITTLE ASSISTANCE TO THE ASSESSEE. IN FACT THE LATTER TWO DECISIONS ARE DISTINGUISHABLE IN-AS- MUCH AS IN THESE CASES THE PARTNERSHIP DEED PROVIDE D FOR ALLOWANCE OF SALARY TO THE WORKING PARTNERS IN TERMS OF THE RELEVANT CLAUSE OF THE ACT (S. 40(B)(V)), AND WHICH IS PRECISE AND DEFINITE, SO THAT THE SALARY COULD B E QUANTIFIED WITH REFERENCE THERETO, EVEN AS EXPLAINED IN AND THEREFORE CONSISTENT WITH THE BOARD CIRCULAR (SUPRA), UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT. SE CTION 40(B)(V) DEFINES THE MAXIMUM REMUNERATION ADMISSIBLE TO THE WORKING PART NERS OF A PARTNERSHIP FIRM, ASSESSED AS SUCH. THE SAID DECISIONS ARE THUS DISTI NGUISHABLE ON FACTS. 4.5 IN VIEW OF THE FORE-GOING, I DO NOT FIND ANY M ERIT IN LAW IN THE ASSESSEES CLAIM QUA THE ALLOWANCE OF REMUNERATION TO THE WORKING PARTN ERS, I.E., IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE SALARY ALLOWED H AVING HOWEVER BEEN, AS GIVEN TO UNDERSTAND DURING HEARING, ASSESSED IN THE HANDS OF THE PARTNERS (TO WHOM IT STANDS ALLOWED), THEY SHALL BE ALLOWED RELIEF BY TH E AO IN TERMS OF S. 155 OF THE ACT. I DECIDE ACCORDINGLY. ITA NO. 412/ASR/2018 (AY 2014-15) GRK AGENCIES V. ITO 12 5. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN CO URT ON APRIL 10, 2019 SD/- (SANJAY ARORA) ACCOUNTANT MEMBER DATE: 10.04.2019 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: GRK AGENCIES 39, CITY LIGHT CINEMA, PUTLIGHAR ROAD, CHHERATTA, AMRITSAR (2) THE RESPONDENT: THE INCOME TAX OFFICER, WAR D 5(2), AMRITSAR (3) THE CIT(APPEALS)-2, AMRITSAR (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T TRUE COPY BY ORDER