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TMI Blog2017 (11) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of Rs. 32 lakhs u/s.68 of the Act ; and ii) That the lower authorities erred in disallowing the adjustment of interest paid of an amount of Rs. 9,87,295/-, towards remuneration received by the assessee during the assessment year under consideration from the firm, namely, M/s. Soundarya Constructions. 02. In regard to the first ground which pertains to the addition of Rs. 32 lakhs u/s.68 of the Act, the AO noted that the assessee has made the cash deposit to the tune of Rs. 36,10,000/- and the assessee failed to explain / satisfy the source for cash deposit made in the bank account at Corporation Bank, Bengaluru. In this regard, the assessee before the CIT (A) has explained that the AO while making this addition has ignored the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion given by the assessee in respect of all the above four transactions cumulatively giving rise to the addition of Rs. 32 lakhs. 5.1 Deposit of Rs. 10,00,000/- made on 22.08.2008 : In this regard the assessee has submitted that the assessee was having opening balance as on 01.08.2008 of a sum of Rs. 10 lakhs and the deposit made into the bank on 22.08.2008 was out of the available cash shown in opening balance. We are of the opinion that this contention of the assessee is in accordance with the judgment of the Hon'ble jurisdictional High Court in the matter of P. Padmavathi v. ITO dt.06.10.2010 in ITA No.414 of 2009, wherein it was held as under : 12. In this case, it is not in dispute that the assessee withdrew a sum of Rs. 5,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case, in the said case the Hon'ble court held that once the assessee was able to explain the availability of cash in hand, then it is none of the concern of the Revenue to doubt the veracity and genuineness of the assertion of the assessee of depositing the same amount in the bank. In the present case, we are not able to appreciate the reasoning given by the CIT (A) in para 5.2 whereby the CIT (A) has rejected the explanation of the assessee, as asserting that when deposits are available there was no reason for assessee to withdraw cash from different bank accounts. The withdrawal of cash from Bank accounts, even of a sum of Rs. 1,76,750/- will not be a reason to assume that the amount of Rs. 10 lakhs of opening balance was not availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithdrawal from the bank, therefore the assessee has explained the deposit of Rs. 12 lakhs. The authorities below failed to bring on record any evidence contrary to the fact that the cash was not available with the assessee . Accordingly the addition made by the officers below to in an amount of Rs. 12 lakh is liable to be set aside and we hold so. 5.4. With respect to deposit of Rs. 5 lakhs on 04.11.2008, it was stated by the assessee that the assessee had received a sum of Rs. 5 lakhs from the firm on 11.02.2008 from his capital, as the firm of the assessee, namely, Soundarya Constructions, was having cash availability. It was explained that the said cash was deposited on 04.11.2008, and it came from his drawings from his capital in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07. On the other hand the Ld. DR relied upon the CIT (A)'s order and submitted that this interest payment cannot be permitted to be deducted against the remuneration earned by the assessee. It was submitted that the assessee was a working partner of the firm and the income earned by the assessee has no correlation with the capital contribution made by the assessee. 08. We have heard the rival contentions and perused the material on record. In the present assessment year the assessee had received a sum of Rs. 14,40,512/- and remuneration of Rs. 9,87,295/-. Clause (5) of the partnership deed dt.06.10.1994 provides for the remuneration of the partners. The same is reproduced herein below : 5. Remuneration to Pareners : All the partners s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bringing more capital will not automatically lead to increase in income. Thus there was no justification and correlation between the income earned by the partner as remuneration under clause (5) of the partnership deed, with the capital contribution made by the assessee in the firm. As there is no correlation or nexus between the capital contribution and the remuneration, it cannot be said that the assessee is entitled for the deduction u/s.36 of the Act. For the purposes of invoking Section 36, it is essential that the amount of interest paid was in respect of the capital borrowed for the purpose of business or profession. Further interest-earning clause for the capital contribution is different from the remuneration of the partners. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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