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2012 (11) TMI 715 - AT - Income TaxUnexplained Addition on account of capital introduced by partners out of Agricultural Income – Held that:-In the case of Veeraiah,considering the smallness of the amount ie Rs.1 lakh and the fact that he was having some agricultural Lnad holding the genuineness of the source for credit in the capital account is not to be doubted and hence delete the same. With respect of M.Srikanth - Held that:- As the assessee has produced documents for land holdings only to the extent of 3.66 acres, which are in his father’s name,it is reasonable to restrict the addition in respect of credit entry in the account of M. Srikant to Rs. 4,00,000/- by allowing credit for the agricultural income of this partner as against the addition of Rs. 7,00,000/- made by the Assessing Officer and confirmed by the CIT(A). With respect to G Venkata Rao – Held that:- As the assessee furnished the details of holding of 11.3 acres ,the probability of earning agricultural income could not be ruled out. However, he had not appeared before the AO for personal examination due to his health condition and, therefore, we find it reasonable to restrict the addition to Rs. 4,00,000/- as against Rs. 7,00,000/- made by the Assessing Officer and confirmed by the CIT(A). Interest on Capital u/s 40(b) - With respect to the plea of the Counsel that the CIT(A) has not justified confirming the additions reading the interest of above three credits, AO noticed that the assessee had claimed interest of Rs.11,26,527/- on the capital account of the partners computed at the rate of 18% p.a. since the provisions of Sec.40(b)(iv) of Act permits interest on partners’ capital account @ 12%, the AO disallowed the balance excess amount of Rs.3,75,509/. with respect to additions u/s.68 of the Act is restricted and the addition in the case of B. Veeraiah has been deleted,issue is set aside to the AO to rework the interest after taking into consideration the additions sustained in the case of M. Srikant and G. Venkata Rao - In the result the appeal of the assessee is partly allowed for statistical purposes.
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