TMI Blog1986 (7) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... ng31-1-1980. One of the partners, i.e., Shri Dwarka Prasad was having a debit balance of Rs. 97,237 in the assessee's account. The assessee had secured interest bearing loans from banks. In these circumstances, the learned IAC made a disallowance at 15 per cent on average debit balance debited at the figure mentioned above. The addition thus made was of Rs. 14,588. 3. The addition was contested by the assessee, Shri B. K. Gupta, the learned authorised representative before the learned Commissioner (Appeals) submitted that out of the total withdrawals made during the year, a sum of Rs. 93,817 had been utilised for the purposes of payment of income-tax and CDS and Rs. 17,000 for personal use. According to him, at the most the disallowance c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. As is mentioned earlier the assessee is a registered firm, constituted for carrying on business for profit. It is not in dispute that it had raised interest bearing loans. It is also not in dispute that average debit balance debited in the partner's account was at Rs. 93,237. Thus, it is seen that the assessee raised interest bearing loans and at the same time allowed one of the partners to make us of huge amounts without any interest. No doubt, we may not compel an assessee to definitely make profits but the assessee was existing, in our view for doing business for profit. Raising interest bearing loans from the market and allowing interest-free loan to the partner could not be considered a business activity for profit. Such interest fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted. 8. The paper book consisting of 16 pages has been gone through and considered. The learned ITO's endeavor was to ascertain and tax the the correct income of the assessee. The modus operandi of the assessee was devised to avoid tax through questionable means. We cannot bestow legitimacy to such a process. The actions of the lower authorities are confirmed. 9. In the result, the appeal is dismissed. Per Shri Anand Prakash, Accountant Member - It is the revenue's allegation that the interest bearing funds have been diverted by the assessee this year for non-business purposes. It has placed no material on record to substantiate the said allegation. It has merely relied on the circumstance that some money has been allowed by the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, I delete it. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT 1961 As it has not been possible for us to come to an agreed conclusion in the present appeal, we refer the following question for the opinion of the Third Member in terms of the aforesaid section :."Whether on the facts and in the circumstances of the case and in law the Commissioner (Appeals) was justified in upholding addition of Rs. 14,580 on account of interest ?" THIRD MEMBER ORDER Per Shri Ch. G. Krishnamurthy, Senior Vice President -This appeal filed by the assessee Bishamber Dayal Badri Prasad was heard by Delhi Bench "C". There was a difference of opinion between the Members as to whether the addition of Rs. 14,580 made by way of disallowing interest a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax and compulsory deposit and the interest paid on the money borrowed for those purposes should be allowed under section 80V of the Income-tax Act, 1961 in his hands and that the disallowance in the hands of the firm was justified. Aggrieved by this observation the assessee filed a further appeal before the Tribunal. 3. While the learned Judicial Member agreed with the view and the approach of the department, the learned Accountant Member had taken a different view. The learned Judicial Member pointed out that when interest bearing loans were raised for the purpose of the business, those loans should be utilised for the purpose of the business and those loans should not have been utilised for the purpose of the business and those loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly considered the arguments addressed to me, I am inclined to agree with the view expressed by the learned Accountant Member. I can do no better in this case than to reproduce the factual position mentioned by the learned Accountant Member in his order : "While doing so, the revenue has omitted to take note of the other relevant attending circumstances, viz., the following :. (i) That the firm had non-interest bearing funds at its disposal as below : At the beginning of At the close of the previous year the previous year Partners' capital 8,39,060 3,29,711 Non-i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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