The Raipur Bench of Income Tax Appellate Tribunal (ITAT) has held that the firm comprising of individual partners could not be treated as Association of People (AOP).
The return of the assessee firm, D.M Builders which was engaged in construction business was selected for scrutiny assessment. During the course of the assessment proceedings, it was observed by the A.O that the assessee firm was constituted vide a partnership deed dated 05.03.2009 comprising of four partners who represented their respective firms.
On a perusal of the records, A.O held that partners were having 25% share in their representative capacity as a partner of their respective firms. Also, it was observed by the A.O that all the four partners had contributed the following properties by way of their capital contributions in the assessee firm.AO assessed by treating it as an Association of Person.
R.B Doshi, appeared on behalf of the asseesee and S.K Meena appeared on behalf of the revenue.
A Single Bench of Ravish Sood, (Judicial Member) allowed the appeal and held that the observation of the A.O that the respective partnership firms had been taken as partners in the assessee firm was absolutely misconceived and misplaced. The Bench held that an individual in his representative capacity could be taken up as partner in a firm.
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