The revised partnership deed was not filed with the return but was produced during the assessment. Does s.185 still disallow the partners' remuneration?
No, on this judgment. The Calcutta High Court held that s.185 read with s.184, although worded in emphatic terms, is not intended to be mandatory. The Assessing Officer had refused to treat the return as defective under s.139(9); having refused that, he could not simultaneously hold the return to be in derogation of s.184(4) and disallow the deduction. The disallowance of Rs. 4,49,60,000 of partners' remuneration was deleted.
Decided by the High Court (Girish Chandra Gupta J and Arindam Sinha J) on 2015-02-24, reported as I.T.A. No. 190 of 2009 (High Court at Calcutta, Special Jurisdiction (Income Tax), Original Side). No law report citation appeared on the copy retrieved.. It bears on section 184, section 184(4), section 185, section 40(b), section 139(4), section 139(9), section 292B, section 260A of the Income Tax Act 1961, in Assessment & Scrutiny and Deductions & Disallowances matters.
Failure to annex the deed after a change in constitution is a common and easily made slip, and s.185 on its face wipes out the entire deduction for interest, salary, bonus, commission and remuneration. This is the High Court authority for treating it as a curable irregularity. It is not, however, the only view: the Kerala High Court in Bhaskar & Co has described production of the certified copy as mandatory, so know which High Court you are in.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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There was a change in the constitution of the assessee firm with effect from 1 August 2004. The certified copy of the instrument recording the change was not filed along with the return, as s.184(4) requires, but was produced before the Assessing Officer during the assessment proceedings, a fact the judgment records as not in dispute. The Assessing Officer, holding that the certified copy had not been filed with the return, disallowed the claim for partners' remuneration of Rs. 4,49,60,000 by applying s.185. The Commissioner (Appeals) reversed him, holding that mere omission to file the deed with the return cannot and should not be treated as fatal. The Tribunal, by order dated 13 February 2009, agreed with the Commissioner (Appeals) and dismissed the Revenue's appeal. The Revenue appealed to the High Court, where the question admitted was whether the Tribunal was justified in overlooking the non-filing of the reconstituted partnership deed along with the returns as required under s.184(4). The Court reframed it as whether the Tribunal was justified in upholding deletion of the disallowance of Rs. 4,49,60,000 on account of partners' remuneration under s.185 when the instrument of change was not filed with the return.
The question was answered in the affirmative and in favour of the assessee and the appeal was disposed of. Section 185 read with s.184, although worded in emphatic terms, is not intended to be a mandatory provision.
The Court's own reasoning is short. It recorded that the Revenue had not disputed that the assessee could have filed its return together with the certified copy of the instrument of change within the period allowed by s.139(4), in which case the return would have been perfectly valid and there would have been no violation of s.184(4). For that step it relied on the Supreme Court decision in CIT, Punjab v. Kulu Valley Transport Co. P. Ltd., 77 ITR 518, which it cited and quoted at length: sub-section (3) of s.22 of the 1922 Act is to be read as a proviso to sub-section (1) of s.22, s.22(1) being in pari materia with s.139(1), so that a return submitted at any time before assessment is made is a valid return. Section 139(4) is read the same way, as a proviso to s.139(1). This is the only authority in the Court's own reasoning. It then took up what had happened before the Assessing Officer: the assessee had asked him to treat the return as defective because the instrument of change was not annexed, which would have given it an opportunity to cure the defect, and the officer refused to do so. Having refused to treat the return as defective, the Court held, he could not also hold that the return was in derogation of s.184(4) and refuse the deductions; and had he held it defective, s.139(9) would have given the assessee a chance to cure it. Either way the conclusion followed that s.185 read with s.184 is not mandatory. The lengthy discussion of s.292B, of Magnum Export, Remfry & Sons, Joshi and Co. and Billimora Engineering Mart, and of the purpose of filing the deed, appears in the judgment as a reproduction of the Tribunal's order and not as the High Court's own reasoning.
In either case, the result is that section 185 read with section 184, although worded in emphatic terms, is not intended to be a mandatory provisions.
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Handle my notice → Ask a CA on WhatsAppNo, on this judgment. The Calcutta High Court held that s.185 read with s.184, although worded in emphatic terms, is not intended to be mandatory. The Assessing Officer had refused to treat the return as defective under s.139(9); having refused that, he could not simultaneously hold the return to be in derogation of s.184(4) and disallow the deduction. The disallowance of Rs. 4,49,60,000 of partners' remuneration was deleted. This was decided by the High Court (Girish Chandra Gupta J and Arindam Sinha J) and bears on section 184, section 184(4), section 185, section 40(b), section 139(4), section 139(9), section 292B, section 260A of the Income Tax Act 1961. It is reported as I.T.A. No. 190 of 2009 (High Court at Calcutta, Special Jurisdiction (Income Tax), Original Side). No law report citation appeared on the copy retrieved.. Failure to annex the deed after a change in constitution is a common and easily made slip, and s.185 on its face wipes out the entire deduction for interest, salary, bonus, commission and remuneration. This is the High Court authority for treating it as a curable irregularity. It is not, however, the only view: the Kerala High Court in Bhaskar & Co has described production of the certified copy as mandatory, so know which High Court you are in. If it applies to you, the first step is this: Produce the certified copy of the revised instrument before the assessment is completed, and get the fact of production recorded. Both this case and the Kerala line turn on whether that happened.
There was a change in the constitution of the assessee firm with effect from 1 August 2004. The certified copy of the instrument recording the change was not filed along with the return, as s.184(4) requires, but was produced before the Assessing Officer during the assessment proceedings, a fact the judgment records as not in dispute. The Assessing Officer, holding that the certified copy had not been filed with the return, disallowed the claim for partners' remuneration of Rs. 4,49,60,000 by applying s.185. The Commissioner (Appeals) reversed him, holding that mere omission to file the deed with the return cannot and should not be treated as fatal. The Tribunal, by order dated 13 February 2009, agreed with the Commissioner (Appeals) and dismissed the Revenue's appeal. The Revenue appealed to the High Court, where the question admitted was whether the Tribunal was justified in overlooking the non-filing of the reconstituted partnership deed along with the returns as required under s.184(4). The Court reframed it as whether the Tribunal was justified in upholding deletion of the disallowance of Rs. 4,49,60,000 on account of partners' remuneration under s.185 when the instrument of change was not filed with the return. The matter was decided on 2015-02-24 by the High Court (Girish Chandra Gupta J and Arindam Sinha J). On those facts the High Court held as follows. The question was answered in the affirmative and in favour of the assessee and the appeal was disposed of. Section 185 read with s.184, although worded in emphatic terms, is not intended to be a mandatory provision.
The Court's own reasoning is short. It recorded that the Revenue had not disputed that the assessee could have filed its return together with the certified copy of the instrument of change within the period allowed by s.139(4), in which case the return would have been perfectly valid and there would have been no violation of s.184(4). For that step it relied on the Supreme Court decision in CIT, Punjab v. Kulu Valley Transport Co. P. Ltd., 77 ITR 518, which it cited and quoted at length: sub-section (3) of s.22 of the 1922 Act is to be read as a proviso to sub-section (1) of s.22, s.22(1) being in pari materia with s.139(1), so that a return submitted at any time before assessment is made is a valid return. Section 139(4) is read the same way, as a proviso to s.139(1). This is the only authority in the Court's own reasoning. It then took up what had happened before the Assessing Officer: the assessee had asked him to treat the return as defective because the instrument of change was not annexed, which would have given it an opportunity to cure the defect, and the officer refused to do so. Having refused to treat the return as defective, the Court held, he could not also hold that the return was in derogation of s.184(4) and refuse the deductions; and had he held it defective, s.139(9) would have given the assessee a chance to cure it. Either way the conclusion followed that s.185 read with s.184 is not mandatory. The lengthy discussion of s.292B, of Magnum Export, Remfry & Sons, Joshi and Co. and Billimora Engineering Mart, and of the purpose of filing the deed, appears in the judgment as a reproduction of the Tribunal's order and not as the High Court's own reasoning. In the words reproduced by the source cited on this page: "In either case, the result is that section 185 read with section 184, although worded in emphatic terms, is not intended to be a mandatory provisions." The decision followed or applied CIT, Punjab v. Kulu Valley Transport Co. P. Ltd., 77 ITR 518 (SC) — relied on and quoted at length in the Court's own reasoning, for reading s.139(4) as a proviso to s.139(1) so that a return filed at any time before the assessment is made is a valid return.
It was decided by the High Court on 2015-02-24 and is reported as I.T.A. No. 190 of 2009 (High Court at Calcutta, Special Jurisdiction (Income Tax), Original Side). No law report citation appeared on the copy retrieved.. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 184, section 184(4), section 185, section 40(b), section 139(4), section 139(9), section 292B, section 260A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The question was answered in the affirmative and in favour of the assessee and the appeal was disposed of. Section 185 read with s.184, although worded in emphatic terms, is not intended to be a mandatory provision. It arises in Assessment & Scrutiny and Deductions & Disallowances matters, on section 184, section 184(4), section 185, section 40(b), section 139(4), section 139(9), section 292B, section 260A of the Income Tax Act 1961, and was decided by Girish Chandra Gupta J and Arindam Sinha J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If the officer proposes a s.185 disallowance, ask him in writing to treat the return as defective under s.139(9) and to give you the opportunity to cure it. This judgment turns on the officer having refused to do so while still relying on the same omission. Take the s.292B point on the return not being invalid for a mistake, defect or omission, but attribute it correctly: in this case that reasoning is the Tribunal's, reproduced in the judgment, not the High Court's own. The one authority you can attribute to the Calcutta High Court itself is CIT, Punjab v. Kulu Valley Transport Co. P. Ltd., 77 ITR 518 (SC), which the Court cited and quoted at length: s.139(4) is to be read as a proviso to s.139(1), so a return submitted at any time before the assessment is made is a valid return. That is the step that makes the return valid and the s.184(4) objection fall away. Every other decision named in the judgment sits inside the reproduction of the Tribunal's order. Check the date. Where the return could still have been filed within s.139(4) at the time the instrument was produced, this judgment records that there would have been no violation of s.184(4) at all. Outside Calcutta, argue this alongside the Delhi High Court decision in Remfry & Sons and the other decisions the Tribunal collected, and be ready for the Kerala view that production is mandatory.
High Courts differ on this point. The Calcutta High Court holds that s.185 read with s.184 is not mandatory where the instrument was produced before the assessment was completed. The Kerala High Court in M/s Bhaskar & Co v. CIT, I.T.A. Nos. 454 and 457 of 2009, decided 15 September 2009, holds that production of the certified copy of the instrument of partnership is mandatory for assessment in the status of a firm, and expressly declined to decide whether production after the return but before completion of the assessment is sufficient compliance. No Supreme Court decision resolving the difference was located. Section 184 and s.185 were not affected by the Finance Act 2021 partnership amendments. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This judgment must be read carefully for whose words are whose. The well-known passages about the omission being 'only an omission', about s.292B, about Magnum Export, Remfry & Sons, Joshi and Co. and Billimora Engineering Mart, and about the defect being 'a curable defect', are all inside the block reproduction of the Tribunal's order, which the High Court set out and then said 'It is this order which is under challenge'. They are not the High Court's own reasoning and are not quoted here as such. The High Court's own reasoning is confined to the last six substantive paragraphs, which were retrieved verbatim, together with the block quotation from CIT, Punjab v. Kulu Valley Transport Co. P. Ltd., 77 ITR 518 (SC) — the one authority in the Court's own text — and the key quote is taken from there. The judgment as printed on Indian Kanoon contains what appears to be a dropped negative: the sentence recording the Revenue's submission ends 'is a submission which we are in a position to accept', although the Court then answers the question in favour of the assessee. Read in context the submission was being rejected; that sentence is not relied on here and is not quoted. The judgment does not state the assessment year; it records that the change in the partnership took effect from 1 August 2004. The paragraphs of the judgment are not numbered. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The question was answered in the affirmative and in favour of the assessee and the appeal was disposed of. Section 185 read with s.184, although worded in emphatic terms, is not intended to be a mandatory provision.
TaxSphere, “CIT v S.R. Batliboi & Associates”, https://taxnotice.vittsphere.com/caselaw/case/cit-v-sr-batliboi-associates-184-185-deed-not-filed-with-return/ (validity last checked 2026-09-07)
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The AO has invoked section 185 because of a defect in the partnership deed filed with our return. What exactly do we lose, and does the partner get any relief?
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