GRK Agencies v ITO — a deed saying salary 'as may be mutually agreed' will not carry a section 40(b)(v) claim
ITATHelps departmentNo later treatment found
Our partnership deed says partners' salary will be as mutually agreed from time to time, and we passed a resolution fixing the amounts. The officer has disallowed the whole remuneration. Can he?
Yes, on those facts. The Tribunal held that a clause providing that salary 'be paid every month/year as may be mutually agreed between the partners from time to time' neither fixes a sum, fixed or variable by reference to profits, nor identifies which partners are working partners, and is therefore at best an authorisation to pay salary and nothing more. Because s.40(b)(ii) requires the payment to be both 'authorised by' AND 'in accordance with' the terms of the deed, identification of the partner and quantification of the remuneration are prerequisites to the deduction, and a later resolution on the firm's letterhead — unstamped, unregistered, undated by the signatories and produced only when the officer asked — could not be treated as a valid amendment of the deed.
Statutory position — s.234D: interest on a refund granted under s.143(1) that regular assessment shows should not have been granted — the rate, the period, the reduction under sub-section (2), and Explanation 2 for assessment years commencing before 1 June 2003
CBDT Circulars & InstructionsCuts both ways
We were given a refund when the return was processed under s.143(1). On scrutiny the Assessing Officer has now raised a demand and has also charged interest under s.234D on the refund. Is that right, for how long does the interest run, and can he do it for an assessment year that is older than the section itself?
Yes, on the conditions in sub-section (1). Section 234D charges simple interest where a refund is granted to the assessee under s.143(1) and either (a) no refund is due on regular assessment, or (b) the amount refunded under s.143(1) exceeds the amount refundable on regular assessment. The rate is one-half per cent, on the whole or the excess amount so refunded, for every month or part of a month comprised in the period from the date of grant of refund to the date of such regular assessment. The section was inserted by the Finance Act, 2003 with effect from 1 June 2003, and the words "one-half per cent" were substituted for "two-third" by the Taxation Laws (Amendment) Act, 2003 with effect from 8 September 2003 — both recorded in footnotes printed against the section. Sub-section (2) provides that where, as a result of an order under s.154, s.155, s.250, s.254, s.260, s.262, s.263 or s.264, or an order of the Settlement Commission under s.245D(4), the refund granted under s.143(1) is held to be correctly allowed either in whole or in part, the interest chargeable under sub-section (1) shall be reduced accordingly. Explanation 1 makes a first-time assessment under s.147 or s.153A a regular assessment for the purposes of the section. Explanation 2, which the later editions of the section print and the earlier ones do not, reads: "For the removal of doubts, it is hereby declared that the provisions of this section shall also apply to an assessment year commencing before the 1st day of June, 2003 if the proceedings in respect of such assessment year is completed after the said date." Which amending Act inserted Explanation 2, and from what date, is not established here — the editions of the section that print it carry no footnotes, and the editions that carry footnotes do not print it.
