TMI Blog1978 (7) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... Deo Marolia. The firm was carrying on business of cotton purchase on commission basis for various cotton mills situated at Kanpur. The partnership was evidenced by a deed of partnership executed on 4th July, 1962. One of the clauses of the said deed, which would be relevant for the purpose of this reference reads as under: "Interest at the rate of 6% per annum shall be charged on the capital of the partners. " While dealing with the assessments for the assessment years 1964-65, 1965-66, 1966-67, 1967-68 and 1968-69, the ITO found that huge amounts of money had been withdrawn by Ram Deo Marolia. The firm had, however, charged no interest from him in these years. Being of the view that interest was chargeable on the debit balance, the ITO made additions in the aforesaid five years. Aggrieved by the judgment and orders of the ITO made in respect of these five years, the assessee preferred five appeals before the AAC. The AAC did not accept the assessee's submission that as there was no provision for charging interest on debit balance standing in the account of a partnership, the additions made by the ITO were incorrect. He, therefore, dismissed the assessee's appeals on his ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of interest paid in respect of capital borrowed for the purposes of business or profession. It would be found from cl. (iii) of sub-s. (1) of s. 36 of the Act that three conditions must be established by an assessee for getting the benefit under the aforesaid clause: (1) interest should have been payable, (2) there should be a borrowing, and (3) capital must have been borrowed or taken for business purposes. If the capital borrowed is not utilised for the purposes of the business, the assessee will not be entitled to deduction under this clause. In case, after having borrowed the capital for business purposes, the firm gives the same to its partners for their personal use or utilization, the firm would not be entitled to claim deduction on the amount diverted for utilization for other purposes or by other persons. This question has been the subject-matter of decisions by several High Courts. It appears to be settled that an assessee-firm cannot be entitled to claim deduction under cl. (iii) of sub-s. (1) of s. 36 of the Act on the amount which is not used for the purposes of business but is given to the partners for their personal use. Reference may be made to the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not utilised for business purposes of the firm. The Tribunal rightly went into this question and found that the deduction claimed by the assessee-firm on the amounts given to Ram Deo Marolia out of the borrowings was not admissible. The addition to the income, of the assessee-firm of the amount which ought to have been charged from its partners on the amount given on loan was inseparably connected with the deduction claimed by the assessee-firm as interest paid in respect of capital borrowed. It would not be correct to say that the point relating to the disallowance of interest on the capital borrowed by the assessee-firm given to Ram Deo Marolia for his personal purposes did not fall within the jurisdiction and power of the Tribunal deciding the appeal. At this place, we are required to consider the scope of the appellate powers of the Tribunal. The relevant portion of sub-s. (1) of s. 254 of the Act reads as under: " (1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit." Placing reliance on the word " thereon ", the learned counsel for the assessee contended that it restricts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect the appellant. If the respondent wanted to challenge the decision of the trial court, it was open to him to file a cross appeal or cross-objections. But the very fact that he had not done so shows that he is quite content with the decision given by the trial court. Therefore, under these circumstances, his only right is to support the decision of the trial court. It is true that he may support the decision of the trial court, not only on the grounds contained in the judgment of the trial court but on any other ground. In appreciating the question that arises before us, one must clearly bear in mind the fundamental difference in the positions of the appellant and the respondent. The appellant is the party who is dissatisfied with the judgment; the respondent is the party who is satisfied with the judgment. Now what we have just said is nothing more than really a summary of the provisions with regard to appeals and cross-objections contained in Order XLI of the Civil Procedure Code; and as we shall presently point out, the position of the Appellate Tribunal is the same as a court of appeal under the Civil Procedure Code and the powers of the Tribunal are identical with the powe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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