TMI Blog2004 (11) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... t may be noticed that the balance standing to the credit of each partner is Rs. 4,87,894 and Rs. 4,62,362 as against which they have withdrawn sums of Rs. 3,37,249 and Rs. 3,47,500, respectively. but the interest was calculated on the amount standing to the credit of each partner before deducting the sums withdrawn. Since the interest thereon, as per the working of the assessee, works out to less than 18 per cent., the assessee claimed deduction of entire interest under section 40(b) of the Act. The Assessing Officer observed that in order to work out the credit balance, the withdrawals during the year should be taken into consideration and thus only on the net balance standing to the credit of each partner interest at 18% was worked out an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship deed the amounts standing to the credit of the partners capital account should be taken into consideration and not the future profits, etc. Since the partners are entitled to profit, etc., at the end of the year when the accounts are finalized, amounts can only be said to have been withdrawn against the balance standing to the credit of each partner in which event there would be depletion in the credit balance and the assessee having paid interest at less than 18 per cent., only that percentage of interest referable to the net credit balance is allowable as deduction. He thus strongly relied upon the orders of the authorities below. We have carefully considered the rival submissions and perused the record. The following chart shows t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artnership deed the partners have agreed to share the profits from day-to-day or even from month to month basis. In fact there is no calculation provided to the Bench in this regard. Learned counsel merely adopted the final share of profit to explain the withdrawals as though the share of profit was withdrawn by the partners leaving the capital untouched. There is no working as to the date of withdrawals and the date on which the amount of remuneration, interest or profit is accrued to the partners so as to claim that the withdrawals are against the share of profit/remuneration/interest, alleged to have accrued to the partners. The conduct of the assessee of not crediting the partners accounts with the aforementioned amounts on a daily/mont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tandard method followed under similar situation. It appears that the banks follow a standard system of calculating interest which could have been adopted by the Assessing Officer. With these observations we set aside the matter to the file of the Assessing Officer to work out the eligible interest. With regard to the interest disallowed and taxed in the hands of the firm, if the partners feel that it is not taxable in their hands, a suitable claim has to be made before the Assessing Officer in the case of partners but it cannot be adjudicated in this appeal. Needless to observe that the Assessing Officer would bear in mind the fact that no tax can be levied without the authority of law (see article 265 of the COI) and examine the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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