1991 (7) TMI 1

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... eave is whether the interest paid on the debit balance of Rs. 1,75,310 taken over by the assessee-firm from the erstwhile Hindu undivided family, would be an allowable deduction under section 36(1)(iii) of the Income-tax Act, 1922. The partners of the firm were members of the Hindu undivided family which carried on business at Varanasi in the name of Badal Ram Laxmi Narain. The family had no capi .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... income. One of the contentions urged for the firm was that the debit balance was taken over by the firm in consideration of the goodwill of the business. The Appellate Assistant Commissioner has held that the Hindu undivided family business had no goodwill. The Tribunal did not agree with the Appellate Assistant Commissioner. It has observed that the business of the Hindu undivided family was of .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ut whether there was any sale of the goodwill. It observed that the goodwill of the Hindu undivided family business was never sold or purchased. Had there been any such transaction, appropriate entries in the books of account of the Hindu undivided family would have been made. The Hindu undivided family should have credited the amount in its account in respect of the price paid for the goodwill an .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ed capital is an allowable deduction. The Tribunal has correlated the debit balance to the purchase of goodwill since the firm has taken over a running business. The High Court has held that there was no sale of goodwill by the Hindu undivided family to the firm, in view of the absence of related entries in the books of account of the Hindu undivided family. The conclusion of the High Court seems .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... lso not acceptable. We are concerned with the rights of the assessee and not the liability of the individual members of the Hindu undivided family. The claim of the assessee for allowable deduction of the interest paid cannot be defeated by the existence of personal liability of the members of the Hindu undivided family. That is wholly beside the point. We are, therefore, unable to sustain the ord .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X