TMI Blog2013 (12) TMI 1364X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment proceedings. Disallowance of interest paid to firm - Held that:- As per clause 12 of the Partnership deed, the partners are entitled to interest on the credit balance in the capital account, as prescribed u/s 40(b)(iv) of the I.T. Act 1961 @ 12% - The partners are also liable to pay interest on the debit balance in capital account on similar basis - the claim of the assessee is emanating out of contractual obligation and is in consonance with the provisions of law - Decided in favour of assessee. - ITA No. 2339/Mum/2012 - - - Dated:- 20-12-2013 - Shri D. Karunakara Rao And Dr. S. T. M. Pavalan,JJ. For the Appellant : Shri G. P. Mehta Shri Vipul Mody For the Respondent : Shri M. Rajan ORDER Per Dr. S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had ignored to describe the nature of business engaged during the relevant previous year and also the assessee had not furnished report u/s 44AB in respect of the same. Accordingly, the AO denied the claim of the assessee for want of evidence that the assessee earned the impugned income in any business. On appeal, the Ld.CIT(A) confirmed the action of the AO as the claim of the assessee was an attempt to cover the income under head 'business' to avail the benefit of accumulated losses of earlier years so that taxability gets substantially reduced. Aggrieved by the impugned decision, the assessee has raised this ground in the appeal before us. 2.2 Before us, the Ld.AR of the assessee has contended that the impugned income has been earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avoid litigation and buy peace, I offer the total sum of Rs. 2 crores (Rs.1.25 crores + 0.75 crores) as additional source of the current financial year i.e. F.Y. 2007-08. I shall be paying the corresponding advance tax on the due date i.e. 15th December and 15th March 2008. It is required that the taxes on the said additional income may also be adjusted against the refund due in the case of M/s. Savani Transport Pvt. Ltd." However, during the assessment proceedings framed under section 143(3), in response to the notice of the AO, the assessee has stated that the business income declared pursuant to the survey proceedings have been duly accepted by the Department and due to the business exigencies, the nature of transaction could not be di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income under the head 'business'. 2.3.1 It appears that the action of the AO and the reasoning of the Ld.CIT(A) for confirming the said action has been only for the purpose of placing the assessee in a position of denying the benefit of accumulated losses of earlier years to be set of against the business income. It is pertinent to mention that while deciding the issue regarding the relevant head of income, whether the assessee would get any other consequential benefit cannot be the guiding factor/test for deciding the relevant head of income, which in our view is a consequential and later effect which follows after determining the relevant head of the income. Therefore, we are not inclined to accept the reasoning of the Ld.CIT(A) that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the firm M/s. MSN Enterprises. The assessee capital account in the firm is shown as under:- Opening balance 01.04.2007 Additions during the year Interest from Partner Share of Loss Withdrawals during the year Balance on 31.03.2008 Nil 64,54,000 (20,71,376) (6,41,315) 1,98,78,088 (1,60,45,779) The assessee paid Rs.20.71 lacs as interest on overdrawn balance in his capital account with the firm and in computation of income (Paper Book Page 2) the assessee had claimed this interest payment as business loss and after setting off this loss, net income is shown at Rs.54.71 lacs. The AO allowed this loss of 20.71 lacs. The Ld.CIT(A) had given calculations ..... X X X X Extracts X X X X X X X X Extracts X X X X
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