TMI Blog1975 (5) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... partnership concern having income from commission agency and dealings in agricultural commodities on own account. The assessment year under appeal is 1974-75 for which the relevant previous year is the financial year 1973-74. 3. Regarding Item No.1: In the relevant previous year profit of Rs. 8492 in the purchase and sale of 65 bales of Narma in the adat of the assessee had been earned by one Sri Satyanarain Bihani. Sri Satyanarain was produced before the ITO and his statement was recorded on 13th Aug., 1975. Thereafter his affidavit was also filed. It appeared to the ITO that Sri Satyanarain was a man of ordinary means being only a Munim, drawing salary of Rs. 400 p.m. He had a family consisting of himself, wife, three sons and two daugh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit in the assessee firm s assessment. Before the learned AAC it was stated by Sri. S.D. Saraf, the assessee s authorised representative, that the ITO had examined Sri Satyanarain and Sri Birbalram a partner of the assessee firm and also recorded their statements. Further, an affidavit of Shri Satyanarain had also been filed. In these full facts had been stated. The learned counsel said that there was no discrepancy or any confusion in the statement of Sri Satyanarain. He had in clear terms owned the transactions of purchase and sale. He was a regular assessee and the profit had been disclosed by him and was also assessed thereon. Even his financial position was sound as he had agricultural lands. The profit also was deposited in his acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adat the profit of Rs. 8,492.60 was received from the firm on 3rd April, 1974 by cheque No. 506896 of the same date. it appears that on that very date that the amount was credited in the account of Sri Satyanarain in the books of M/s. Sagarmal Bhagwati Pd. Against this withdrawals have been made by Sri Satyanarain from time to time. He declared the profit in his return of income also and has been assessed. In the next assessment year this person has done some business in cotton also through K. Commercial Co. Pvt. Ltd., Sriganganagar and made a profit of Rs. 1,397. The material on record clearly shows that the profit was earned by Satyanarain, himself and the profit was, in fact, utilised by him. There is no material on the basis of which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement of the accounts and not at the and of the year. The learned AAC, however, found that the debtors were either the partners themselves or sons of the partners and moreover the accounts had been credited and debited on certain occasions in the relevant previous year and yet, no interest was charged and, therefore, he was not convinced by the explanation given. The learned AAC also noted that the assessee s system of accounting was mercantile and since interest was payable in these accounts, it was incumbent on the assessee to charge interest on accrual basis and take the same into account in the computation of the total income for this year. He felt that the charging of interest could not be left either on the sweet will of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrowed money and that fact too stands undisputed. In this account, therefore, the interest was not chargeable and the authorities below were not right in including Rs. 2,000 as accrued interest in this account. We delete Rs. 2,000 sustain the balance. 6. Regarding item No. 3: The authorities below disallowed Rs. 1,492 on the messing of Veoparis and Rs. 1,120 on tea etc. to the employees and adatias as entertainment expenditure. The learned counsel for the assessee claims the impugned expenditure to be business expenditure on the authority of Gujarat High Court decision in the case of Patel Bros. Co. Ltd.(1), Andhra Pradesh High Court decision in Addl. CIT vs. Maddi Venkataratnam Co.(2) and Bombay High Court decision in CIT vs. Nanj ..... X X X X Extracts X X X X X X X X Extracts X X X X
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