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2020 (12) TMI 71 - AT - Income TaxDisallowance of proportionate bank interest and drawings made by the Managing Partner of the firm - Interest payment attributable to interest paid on funds diverted for non business purposes viz. gifts made - AO proposed to disallow a portion of bank interest on the ground that interest bearing funds had been diverted for non business purposes and the purpose of making the gift was not explained by the assessee and the assessee has also not proved that the gift was made by the assessee out of commercial expediency - HELD THAT:- The partner has withdrawn his own funds from his current account with the firm. It cannot be said that the assessee's funds should be used for business purposes only and the partners' cannot withdraw their money which leads to the firm borrowing interest bearing funds. In our opinion, this issue is squarely covered by the decision of this Tribunal in the case of S. Jameela vs. ACIT [2012 (7) TMI 1117 - ITAT COCHIN] As gone through the reconstituted partnership deed dated 31st March, 1994 and 28th June, 2018. As per the latest reconstituted partnership deed dated 28th June 2018, clause 6 specifically mentions that the partners are at liberty to withdraw any amount from the partnership against the amount outstanding in his credit in the firm. Being so, withdrawal of money by the partner from his current account does not carry any interest and he is at liberty to draw the same from his current account. Accordingly, we find force in the argument of the Ld. AR that no proportionate disallowance of interest could be made - Decided in favour of assessee.
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