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2018 (4) TMI 1949 - ITAT KOLKATAAddition u/s 41(1) - cessation of liability by the assessee - CIT-A deleted the addition - HELD THAT:- CIT(A) categorically come to the conclusion that the provisions of section 41(1) cannot be invoked at all inasmuch as these liabilities does not cease to exist. CIT(A) had verified the balance sheet of the assessee and had found the assessee had made certain payments to one party in AY 2013-14 and with regard to other parties, pursuant to the disputes chose not to pay the dues , and had decided to show the balances payable to these parties even as late as on 31.03.2013. Hence, there cannot be any case to invoke the provisions of section 41(1) on the ground of cessation of liability by the assessee. None of the factual findings given by the Ld. CIT(A) in his order have been controverted by the revenue before us with material contrary evidences. No justifiable reason to interfere in the order of the Ld. CIT(A) in this regard. Accordingly, ground no. 1 raised by the revenue is dismissed. Proportionate disallowance of interest on borrowed funds - CIT-A deleted the addition - HELD THAT:- As categorical finding given by the CIT(A) that one partner has allowed his credit balance i.e. own funds to be withdrawn by the another partner of the firm. Hence, there cannot be any utilization of borrowed funds for excess withdrawals made by one of the partners and consequentially, there cannot be any disallowance of interest on borrowed funds on a proportionate basis. There is no provision in the partnership deed to charge interest on the excess withdrawals made by any of the partners from the firm. While this is so, when one partner has accommodated another partner to withdraw the balances, which is only internally made between the two partners without disturbing the borrowed funds of the firm. Hence, it cannot be categorized as withdrawal of the borrowed funds of the assessee firm, so as to warrant disallowance of interest on a proportionate basis. Accordingly, CIT(A) had rightly deleted the disallowance of interest - Decided against revenue.
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