Section 184 deals with Assessment of partnership firm. The partnership firm will be taxed as a separate entity. The share of the partner in the income of the firm will not be included in the hands of the partner. It is exempt u/s 10(2A). Any bonus, salary, commission, remuneration paid or payable to partners will be allowed as deduction subject to certain restrictions. The income of the firm will be taxed @ 30% plus education cess and secondary & higher secondary education cess 2% and 1% respectively.
Conditions to be fulfilled to be assessed as firm:
- The firm should have a partnership deed containing the terms of partnership.
- Share of each partner in the partnership should be specified in the deed.
- Certified copy of the deed should be attached with the first return of income of the firm
- Other cases where certified copy of deed is required:
a) Change in constitution of firm or change in profit-sharing ratio
b) Change in remuneration/ interest payable to partners.
Income tax Act, 1961, sec. 40(b), 144 & 184(5)—Best Judgment Assessment—AO disallowed interest & salary paid to partners while making best Judgment assessment u/s 144. Case was remanded back to the AO. While deciding the appeal in favour of assessee, the ITAT, Amritsar Bench held that:— “We are of the considered opinion that no doubt the AO has completed the same u/s 144 of the IT Act, 1961 after issuing notices to the assessee but the assessee remained absent from the assessment proceedings. The AO invoked S. 184(5) of the Act and disallowed the interest and salary; keeping in view the impugned order at page Nos. 6 and 7, the learned first appellate authority himself narrated the arguments of the learned counsel for the assessee that once assessment is remanded back by the learned CIT(A) to the AO, the original default committed u/s 142 is washed off. The learned first appellate authority has also considered the submissions of the assessee, especially the remand report given by the AO but he held that original default u/s 142 remained intact even if the assessee later on produces books of accounts before the learned CIT(A) or any other authority including the AO. We are of the considered opinion that this observation of the learned first appellate authority is wrong because when the assessee has produced the books of account before the learned first appellate authority or before the AO in a remanded proceeding, the original default u/s 142 does not remain intact because the original assessment has already been set aside by the learned first appellate authority by sending the matter back to the AO and the assessee has produced all books of accounts. After going through the Tribunal’s order and the written submissions filed by the learned Departmental Representative, we are of the considered opinion that this Bench has adjudicated the issue in dispute on 22nd July, 2009 in the case of the ITO vs. Reshi Construction Co. and vice versa in ITA Nos. 462 and 478/Asr/2008, for the A.Y. 2005-06, vide order dt. 22nd July, 2009 (supra) in which the assessment was also completed u/s 144 of the Act and the AO disallowed the interest and salary to the assessee since the books of account have not been produced before him but later on the assessee produced the same and this Bench had allowed the deduction of interest and salary to the assessee. Keeping in view the facts and the circumstances of the present case, we are of the considered opinion that the issue involved in the present case is squarely covered by the decision of the Tribunal, Amritsar Bench, Amritsar, in the case of the ITO vs. Reshi Construction Co. and vice versa in ITA Nos. 462 and 478/Asr/2008, for the A.Y. 2005-06, vide order dt. 22nd July, 2009 (supra) and respectfully following the same, the addition in dispute is deleted by allowing the ground No. 2. ” Jee Enn Engineers Vs. ITO  15 ITCD 69 (ITAT-Amritsar)
S. 144 & 184(5) of IT Act, 1961—Assessment—Return filed by the assessee long after the time available for this purpose is non est and, therefore, the assessment has to be made u/s 184(5) treating the assessee as AOP—V.K. Kamat Bros. & Ors. Vs. ITO.  228 CTR 290 (Bom)
S. 184, r/w s. 144 of IT Act, 1961—Firm—The failures covered by S. 144(1), which attract disallowance of deductions claimed by the firm towards payment of interest, salary, bonus, commission of remuneration to its partners u/s 184(5), are failure to file return under sub-section (1),(4) or 5 of S. 139 or failure to comply with all the terms of notice issued u/s 142(1), 143(2), etc. The assessee was involved in the failures referred to in S. 144 inasmuch as, it had not filed a regular return voluntarily and there was no occasion for it to file any return under sub-section (4) or (5) of S. 139 of the Act. Therefore, the assessee is not entitled to the deductions which the Assessing Officer allowed while completing assessment u/s 147 in violation of S. 184(5) of the Act for failure committed by the assessee as referred to u/s 144(1) of the Act—Radha Picture Palace Vs. DCIT
S. 184 of the IT Act, 1961—Firm—Prior to the introduction of the amendment provisions of S. 184 which came into force w.e.f. 1.4.1993, a firm could be assessed either as a registered firm on complying with the formalities or otherwise only as an Association of Persons. However, with effect from the assessment year 1993-94 onwards, registration of a firm has been dispensed with, but for the first time, if a firm seeks registration in that status for any assessment year commencing on or after 1.4.1993, the firm has to furnish certified copy of the instrument of partnership along with the return for the relevant assessment year and if the assessee does not produce the certified copy of the deed of partnership when the assessment is taken by the Assessing Officer, then the assessee is not entitled to assessment in the status as a firm. Hence, the production of certified copy of instrument of partnership is mandatory for claiming assessment in status of a firm for any assessment year commencing from 1993-94 onward, irrespective of whether assessee has been assessed as a registered firm up to 1993-94—Bhaskar & Co. Vs. CIT  230 CTR 99 (Ker.)
S. 144 & 184 of IT Act, 1961—Assessment—The bar on deduction in respect of salary and interest to partners of a firm does not operate absolutely, and the partners shall on moving their respective Assessing Officers, be entitle to disallow amount(s) being deleted from their taxable income(s), even where return is filed and assessed, in view of the clear provision of S. 184(5), r/w S. 28(v) of the Act. Hence, in absence of any rebutted, or denial the fact of non-compliance of various notices as listed in the assessment order, best judgment assessment is justified—Sai Construction Vs. ITO.  127 TTJ 15 (ITAT-Ctk)
S. 184(7) of IT Act, 1961—Registration—Cases where registration is refused for the reasons set out in S. 184(4) or (7) are really cases where there is an order refusing registration to the firm by rejecting its application within the meaning of S. 185(2) or (3). Even where a declaration which has been filed beyond time is to be treated to be not in order and the assessee is entitled for an opportunity to explain the circumstances under which the declaration was not filed within time—Bharat Construction Company Vs. CIT (2011) 330 ITR 285 (All)
S. 40(b), 184 & 185 of IT Act, 1961—Assessment as AOP—If the assessee has entered into partnership with a firm which is not a valid firm and therefore, the assessment would be made in the status of AOP instead of status of firm and claim of assessee for deduction of remuneration paid to working partners is also not considerable—DCIT vs. Cochin Residency (2011) 136 TTJ 74 (ITAT-Coch)
S. 184, r/w s. 185 of IT Act, 1961—Firm—After amendment in S. 184 w.e.f. 1.4.1993, a firm can be assessed as a firm for the purpose of the Act, if the partnership is evidenced by an instrument; and the individual shares of the partners are secified in that instrument. Hence, in view of amended provisions of said section, a firm, to be assessed as a firm, is required to submit a certified copy of instrument of partnership or copy of partnership deed signed by all partners specifying individual share of partners—Sood Bhandari & Co. Vs. CBDT
S. 184(3) & 185 of IT Act, 1961—Firm—When S. 184 contemplates the assessment of a firm as such, it contemplates a genuine firm in existence. For that matter any assessment of a taxable entity under the IT Act presupposes that the entity is genuine. The Act gives the Assessing Officer the power to assess a person to tax u/s 143. There is no express power conferred in the section upon the Assessing Officer to enquire into the genuineness of the person. That however does not mean, and it can never be argued, that an Assessing Officer cannot examine or enquire into the genuineness of a person liable to tax. The relationship between the partners is that of agency and it is the duty of the Assessing Officer to examine whether such a relationship in fact exists. Unless such a relationship genuinely exists, he cannot consider that the partnership has been validly constituted. When S. 184 refers to a firm, it refers to a firm validly constituted under the Partnership Act, which in turn means that it is a genuine firm—A.C. Chenna Reddy (Firm) Vs. ACIT (2011) 141 TTJ 690 (ITAT-Mum.)
S. 184, r/w S. 40(b) of IT Act, 1961—Firm—When the Tribunal in earlier year in assessee’s own case had held that assessee is eligible for registration as a firm, the claim of assessee seeking deduction on account of salary paid to partners of firm and interest on their capital contributions is allowable.—ACIT Vs. Ganpati Enterprises Ltd.  142 ITD 118 (ITAT-DELHI)
Section 184 of the Income-tax Act, 1961—Firm—CIT Vs. Shiv Om Kutir Udyog.
Section 184 Income-tax Act, 1961—Firm—CIT Vs. Raj Kamal Stores.
Section 184, of the Income-tax Act, 1961, read with Article 226 of the Constitution of India—Firm—Daljeet Singh Anand Vs. Institute of Chartered Accountants of India.
As Per S. 184, of the Income Tax Act, 1961-
Assessment of a firm.
- (1) A firm shall be assessed as a firm for the purposes of this Act, if—
(i) the partnership is evidenced by an instrument ; and
(ii) the individual shares of the partners are specified in that instrument.
(2) A certified copy of the instrument of partnership referred to in sub-section (1) shall accompany the return of income of the firm of the previous year relevant to the assessment year commencing on or after the 1st day of April, 1993 in respect of which assessment as a firm is first sought.
- —For the purposes of this sub-section, the copy of the instrument of partnership shall be certified in writing by all the partners (not being minors) or, where the return is made after the dissolution of the firm, by all persons (not being minors) who were partners in the firm immediately before its dissolution and by the legal representative of any such partner who is deceased.
(3) Where a firm is assessed as such for any assessment year, it shall be assessed in the same capacity for every subsequent year if there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the assessment as a firm was first sought.
(4) Where any such change had taken place in the previous year, the firm shall furnish a certified copy of the revised instrument of partnership along with the return of income for the assessment year relevant to such previous year and all the provisions of this section shall apply accordingly.
(5) Notwithstanding anything contained in any other provision of this Act, where, in respect of any assessment year, there is on the part of a firm any such failure as is mentioned in section 144, the firm shall be so assessed that no deduction by way of any payment of interest, salary, bonus, commission or remuneration, by whatever name called, made by such firm to any partner of such firm shall be allowed in computing the income chargeable under the head “Profits and gains of business or profession” and such interest, salary, bonus, commission or remuneration shall not be chargeable to income-tax under clause (v) of section 28.