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TMI Blog2014 (11) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... 'the Tribunal'), rendered in ITA No. 955/Ahd/1989 for the A.Y. 1985-86 and ITA No. 2980/Ahd/1990 for the A.Y. 1986-87, whereby, the Tribunal partly allowed the appeals filed by the assessee. 3. The brief facts of the case, so far as ITR No.67 of 1993 is concerned, are that the assessee, which was consisting six partners during the relevant financial year, had one Shri. J.M. Doshi as one of its partners. Shri. Doshi was proprietor of two concerns, namely (1) Saurashtra Metal Supplying Company and (2) Jayant Trading Corporation. As the proprietor of the aforesaid firms, Shri. Doshi supplied financial assistance to the assessee, herein, and towards the same, the assessee, herein, paid a total sum of Rs. 2,93,053/- at the rate of 18 per cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Whether, on the facts and circumstances of the case, the dis-allowance of the finance, commission of Rs. 2,93,053/- paid to proprietory concern of the partner under provisions of Section 40(b) was justified in law?" 6. Tax Appeal No. 281 of 1999 is preferred by the Revenue, seeking to challenge the order of the learned ITAT, Rajkot ('the Tribunal', for short), Dated : 25.02.1999, rendered in ITA No. 4469/Ahd/1991 for the A.Y. 1987-88, whereby, it partly allowed the appeal of the Revenue. 7. In that case the assessee, herein, filed its return of income for the A.Y. 1987-88 on 30.06.1987, declaring a total income of Rs. 17,963. Pursuant thereto, a notice under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1994) 209 ITR 972. In that case, this Court, while refereeing to an earlier decision of this Court in "CHHOTALAL AND CO. VS. CIT", [1984] 150 ITR 276, observed that in computing the business profits of the assessee-Firm, the interest paid to an individual on monies advanced by him from his individual fund could not be disallowed on the ground that he was partner of the assessee-Firm, as a 'Karta' of Hindu Undivided Family. This Court, further, held that when the assessee represents an HUF, the interest paid to the HUF is to be disallowed and not any interest paid to the assessee in his account for the advances made by him personally and under Section 40(b) of the Act, it is only the interest paid to the partner, which is not allowed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with, the terms of the partnership deed, but which relates to any period (falling prior to the date of such partnership deed) for which such payment was not authorised by, or is not in accordance with, any earlier partnership deed, so, however, that the period of authorisation for such payment by any earlier partnership deed does not cover any period prior to the date of such earlier partnership deed; or" (iv) any payment of interest to any partner which is authorised by and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as such amount exceeds the amount calculated at the rate of [twelve] per cent simple interest per annum; or (v) any payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal fund and the commission or interest paid by the assessee to Shri. Doshi was in his individual capacity and not as a partner. Hence, same was not liable to be disallowed in view of the clear provisions of Section 40(b) of the Act and the decisions of this Court cited, herein above. 14. In the case of Trust also, which provided financial assistance to the assessee, Shri. Doshi was one of the trustees and on the basis of the same, the AO hold that the amount was paid by the assessee to one of the partners, i.e. Shri. Desai, which is also quite contrary to the principle of law laid down by this Court in its decisions, which are referred herein above. As a outcome of the above discussion, we are of the opinion that in view of the decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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