TMI Blog1966 (3) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... case No. 125 of 1964, which covers the second question. The material facts as appearing from the two statements of the case are these: The assessment year is 1954-55, the account year being the one ending Diwali 1953. Originally, the Income-tax Officer, by his order dated July 10, 1957, assessed Messrs. Harnandrai Shrikishan in the status of a registered firm and disallowed, as required by section 10(4)(b) of the Act, ₹ 12, 358 paid as interest to Shrigopal, one of the partners of the firm. The status of the assessee as a registered firm had been questioned before the Tribunal in another appeal arising out of the assessment made for an earlier year. The Tribunal held that there was no genuine firm in existence in the account year corresponding to that assessment year. Since there was no change in the subsequent years in that position, the Commissioner of Income-tax, by his order dated June 17, 1959, revised under section 33B(1) of the Act the order of assessment made by the Income-tax Officer on July 10, 1957, and directed him to reassess Messrs. Harnandrai Shrikishan in the status of an association of persons and also to disallow the interest paid to Shrigopal. Being aggr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney borrowed by it for its business from one of its members was allowable under section 10(2)(iii) as a legitimate business expense. In regard to the first question, the amount of interest paid on capital borrowed for the purpose of business is a deduction which is, subject to certain exceptions, allowable under section 10(2)(iii) of the Act. The exception which was initially said to be material in this case was that no interest which had been paid to a partner of the assessee-firm could be allowed. But the assessee was subsequently assessed to tax in the status of an association of persons. The proviso to section 10(2)(iii) does not apply to such an association, which is an entity quite distinct from the individual members who cumulatively constitute the association. In our opinion, a member, who advances money to the association for its business, is in the position of a creditor of the association and the interest paid to him qua creditor is a legitimate business expense allowable under section 10(2)(iii) of the Act. Coming to the second question, it is obvious from the Tribunal's order dated June 23, 1961, that it resorted the appeal by rectifying under section 35(2) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istake should be discoverable from the assessee's own record and not from the record of another assessee or as a result of disposal of another case: Income-tax Officer v. S.K. Habibullah [1962] 44 I.T.R. 809 (S.C.) and Second Additional Income-tax Officer v. Atmala Nagaraj [1962] 46 I.T.R. 609 (S.C.). In our opinion, a mistake, which is not gatherable from the record as it stands and requires, for being shown to be a mistake, matter or evidence extraneous to the record is not a mistake apparent from the record which can be corrected under section 35 of the Act. In the instant case, as indicated earlier, the so-called mistake could be shown only by placing before the Tribunal material extraneous to the record. Rectification of such a mistake is, in our view, not within the ambit of the powers exercisable under section 35 of the Act. But there is another aspect of the question. Although a mistake, which could be shown to be such only with reference to material extraneous to the record, is not a mistake apparent from the record within the meaning of section 35 of the Act, the other aspect of the question is whether it is such a mistake for the reason that rule 24 of the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53 I.T.R. 323, 334 (F.B.). After an elaborate consideration of the arguments advanced in the case, Ramachandra Iyer C.J., who spoke for the court, concluded as follows: To sum up the position, the Appellate Tribunal is the appointed machinery under the Act for finally deciding questions of fact in relation to assessment of income-tax. Its composition, consisting as it does of qualified persons in law and accountancy, makes it peculiarly qualified to deal with all questions raised in a case, whether there be assistance from the party or his counsel or not. Section 33(4) obliges it to decide an appeal, after giving an opportunity to the parties to put forward their case. The giving of the opportunity only emphasises the character of the quasi- judicial function performed by the Appellate Tribunal. The fact that that opportunity is not availed of in a particular case, will not entitle the Tribunal not to decide the case. There can be no decision of the case on its merits if the matter is to be disposed of for default of appearance of the parties. Further, an adjudication on the merits of the case is essential to enable the High Court to perform its statutory duty and for the Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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