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TMI Blog2013 (7) TMI 613X X X X Extracts X X X X X X X X Extracts X X X X ..... artnership firm constituted by the family members of late Sh. Khushi Ram and carrying on business since 1989. From time to time there were changes in the constitution of the partnership firm and the last change in the constitution was made in the year 2000 vide partnership deed dated 1st August, 2000 with effect from 1st April,2000 when S/Shri Anu Bansal, Krishna Kumar Bansal Karta of HUF) and Rajeev Bansal, retired from the firm. 3.1 That owing to some disputes amongst the family members of various branches of the group, the settlement of the accounts of the retiring partners could not be made and the same remained outstanding in the balance sheet year after year. however, in order to present the rosy pictures about the financial health o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers. As far as the application of principle laid down by the Hon'ble Supreme Court in the case of T.V. Sundaram Iyengar & Sons Ltd. was concerned, the same was also not applicable because old partners / loans were not the trading liability but were on capital field. However, the Assessing Officer did not agree wit the contention of the assessee and made the addition in respect of the amount so transferred. The Assessing Officer in his conclusive paragraph observed as under:- "In view of the above facts and discussion made above, it has already been proved that the written off the liability of loans/old capital balance of 17,59,866/- by way of transferring directly to partner's capital account is a cessation of liability in view of the guid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries so made by the assessee in the books of accounts, now it has become more clear that the existing partners in whose account the amount has been transferred is personally indebted to the respective account holders and the firm as such may not be liable for that though overall liability in the books of accounts remains same. As regards the applicability of the provision of Section 41(1) of I.T. Act is concerned, the provision of Section 41(1) is not applicable to the facts of the case because the amounts standing in the old partners account are not on account of any trading liability, but represent their capital contribution. Therefore, the very conditions of applicability of the provision of Section 41(1) as held by the Hon'ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The old partners balances have been taken over by the new partners. Hence by no stretch of imagination, it can be said that there has been cessation of liability. Moreover, as held by the Hon'ble Delhi High Court in the case of C.I.T. vs. Auto Kashyap India Pvt. Ltd. (supra), the transfer of amount from one account to another which ultimately remained with the firm is not a cessation of liability. We agree with the Ld. Commissioner of Income Tax (A) that though the assessee hastransferred the amount of old partners / loan to the existing partners, but in law it does not materially affect because under the law it is the partners who are personally liable for any debt. We agree with the view taken by the Ld. Commissioner of Income Tax (A) tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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