TMI Blog1998 (3) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case, it is correct in law to make a separate addition of Rs. 63,859 representing the interest and remuneration paid to partners, to the income already estimated and assessed from contracts ?" 2. The assessee is a registered firm having contract business in engineering works and some of its work was done through sub-contractors. For the asst. yr. 1981-82, the gross contract r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pheld the order of the CIT. The question stated above has, therefore, been referred at the instance of the assessee. 3. Learned counsel for the assessee relying on a decision of this Court in Maddi Sudarsanam Oil Mills Co. vs. CIT (1959) 37 ITR 369 (AP) : TC 42R.1310 submitted that where the books of account have been rejected, the Revenue cannot rely on the same books for addition of cash cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly as it is regarded as payment of interest to oneself and such deduction has to be disallowed. On this basis, the Special Bench upheld the addition of interest paid to the partners even after assuming the net profit. He submitted that this modification of the net profit with reference to the provisions of s. 40(b) was justified and hence the question should be answered in the affirmative. 4. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while making such an estimate. This will also mean that the embargo placed in s. 40 is also taken into account. 5. No doubt there is big difference between profit earned with own capital and profit earned with borrowed capital and such a difference could have been taken into account by the ITO while making an estimate. If the CIT had set aside the estimate on the ground that the vital fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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