1998 (2) TMI 155

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..... the learned counsel for the assessee and the learned Departmental Representative and have perused the material placed before us. 3. The assessee is an individual and derived income, inter alia, from share of profits from two partnership firms M/s. Mohanlal & Co. and M/s. Melco Wines. The dispute in this appeal relates to interest paid/payable on loans raised for investment in the said firms. 4. .....

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..... for the reasons recorded in the following paragraphs of this order, we allow the assessee's claim for interest amounting to Rs. 2,875. This shall be allowed as a deduction in determining the assessee's income. 5. The next contention is about the assessee's claim for interest amounting to Rs. 20,020. The assessee had raised a loan of Rs. 50,000 on 3-2-1976 from M/s. Dharam Singh Babek Singh and i .....

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..... assessee was not maintaining any accounts in respect of the partnership business, it should be taken that the assessee is following cash system of accounting in respect of the income from Partnership. In our view, the learned AAC has rightly held that by virtue of section 67(3) this contention cannot be accepted. 7. Section 67 of the Income-tax Act, 1961 prescribed the manner of computing a part .....

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..... ned counsel for the assessee, the share of profit from a firm is arrived at not according to any system of accounting but according to the statutory provisions contained in section 67. According to him, therefore, it cannot be said that the assessee's share of profit in the firm Melco Wines was computed on any system of accounting and, therefore, the whole interest was allowable on payment basis. .....

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..... us was the mercantile system of accounting under which an expenditure can be claimed as soon as liability in respect thereof arises. We, therefore, agree with the authorities below that expenditure on account of interest pertaining to earlier years was not allowable as a deduction in the year under consideration. The appeal is accordingly partly allowed.
Case laws, Decisions, Judgements, Order .....

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