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2017 (10) TMI 1216 - ITAT DELHIAddition on account of interest on debit balance of the partners capital account by invoking of Section 40(b)(iv) - Held that:- The partners were required to pay interest on the debit balance at the same rate which was applicable on their credit balance. In the present case, it is not in dispute that there was debit balance in the account of the partners, however, the said debit balance has been considered by the AO on the last date of the year. In my opinion, the interest is to be charged on day to day basis and not on the balance at the end of the year. In the present case, since there is clear provision in the partnership deed for charging the interest on the debit balance of the partners and the assessee is also paying interest on the credit balance to the partners. Therefore, do not see any infirmity in the impugned order passed by the ld. CIT(A). However, the AO is required to work out the interest to be charged on the debit balance on day to day basis and not at the end of the year, for this limited purpose, the issue is restored back to the file of the AO. Disallowance of the telephone expenses, car repairs & maintenance as well as care car petrol expenses - Held that:- In the present case, the assessee admitted before the ld. CIT(A) that no separate telephone or vehicles were there for the personal use and that no log-book was maintained for running of the cars, in such circumstances, the personal use by the partners and the employees cannot be ruled out in such type of cases. However, the disallowance made by the AO and sustained by the ld. CIT(A) appears to be on higher side. I, therefore, considering the totality of the facts and to meet the ends of justice, deem it appropriate to reduce the disallowance to the extent of 10% of expenses incurred on telephone, car repairs & maintenance and car petrol instead of 1/8th made by the AO and sustained by the ld. CIT(A).
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