Notional interest on partners' debit balances was rejected where no agreement required the firm to charge interest.

Notional interest on partners' debit balances could not be added to the firm's income where no agreement required the firm to charge interest and, on the facts, no income had really accrued or been deemed to accrue. Following the Tribunal's view for earlier assessment years on identical facts, the addition for deemed interest was deleted in favour of the assessee.

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Issues: Whether the addition made on account of deemed interest on the debit balances of two partners was sustainable.

Analysis: The assessee's case was identical to the earlier assessment years, in which the Tribunal had already held that no addition could be sustained on account of notional interest income. It was found that there was no agreement requiring the firm to charge interest on the partners' debit balances, and in the absence of such an agreement no income could be said to have really accrued or been deemed to have accrued to the assessee-firm.

Conclusion: The addition of Rs. 30,421 was deleted and the issue was decided in favour of the assessee.

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