TaxTMI 
TaxTMI 
1986 (7) TMI 175
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.... contested by the assessee, Shri B. K. Gupta, the learned authorised representative before the learned Commissioner (Appeals) submitted that out of the total withdrawals made during the year, a sum of Rs. 93,817 had been utilised for the purposes of payment of income-tax and CDS and Rs. 17,000 for personal use. According to him, at the most the disallowance could be restricted to the sum utilised for personal purposes. The learned Commissioner (Appeals) rejected the assessee's plea, inter alia, with the following observation : "After studying the facts of the case it appears threat the reason given by the appellant is not in accordance with the law. The claim of interest for payment of tax can be allowed in the hands of an assessee in accordance with section 80V of the Income-tax Act, 1961 but this is applicable only in the hands of the partner and not in the case of the firm. The disallowance made by the IAC in the case of the firm is, therefore, held to be justified. The IAC is however directed to examine whether interest to the extent of utilisation of moneys taken from the firm for payment of Income-tax but not of CDS may be allowed in his personal assessment. The ground tak....
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.... pay interest. This cannot be said as doing business for profit. The partner was allowed to make use of the assessee's money for personal purposes. The interest was, therefore, rightly disallowed by the learned IAC to the extent such amount was put to non-business use by giving to the partner free of interest while at the same time the assessee was under the interest bearing loans. The approach of the lower authorities on this point appears to be quite correct and consistent. No interference is, therefore, warranted. 8. The paper book consisting of 16 pages has been gone through and considered. The learned ITO's endeavor was to ascertain and tax the the correct income of the assessee. The modus operandi of the assessee was devised to avoid tax through questionable means. We cannot bestow legitimacy to such a process. The actions of the lower authorities are confirmed. 9. In the result, the appeal is dismissed. Per Shri Anand Prakash, Accountant Member - It is the revenue's allegation that the interest bearing funds have been diverted by the assessee this year for non-business purposes. It has placed no material on record to substantiate the said allegation. It has merely r....
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....owance should, in my opinion, be deleted. Accordingly, I delete it. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT 1961 As it has not been possible for us to come to an agreed conclusion in the present appeal, we refer the following question for the opinion of the Third Member in terms of the aforesaid section :."Whether on the facts and in the circumstances of the case and in law the Commissioner (Appeals) was justified in upholding addition of Rs. 14,580 on account of interest ?" THIRD MEMBER ORDER Per Shri Ch. G. Krishnamurthy, Senior Vice President -This appeal filed by the assessee Bishamber Dayal Badri Prasad was heard by Delhi Bench "C". There was a difference of opinion between the Members as to whether the addition of Rs. 14,580 made by way of disallowing interest attributable to diversion of borrowed funds for non-business purposes was justified. 2. The assessee is a registered firm carrying on business as a dealer in iron and steel angels, etc., atDelhi. It claimed, inter alia, a deduction for a sum of Rs. 36,661 under the head 'Bank charges' and interest as against a claim of Rs. 63,383 made under this head in the last year. The ITO noticed that there w....
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....y the firm to be overdrawn by a partner without paying any interest and that since there were interest bearing borrowings, it should be presumed that it was those interest bearings borrowings that were allowed to be overdrawn by the partner. He gave his reasons as to how factually this position was incorrect and then concluded that it was not the borrowed funds that were utilised by the partner and, therefore, the question of disallowing any interest did not arise. 4. On account of the difference of opinion, the President of the Tribunal has referred this matter to me as the Third Member for my opinion. The point of difference of opinion as formulated by my learned brothers is as under : "Whether, on the facts and in the circumstances of the case, and in law the Commissioner (Appeals) was justified in upholding addition of Rs. 14,580 on account of interest ?" 5. After going through the orders of my learned brothers and after carefully considered the arguments addressed to me, I am inclined to agree with the view expressed by the learned Accountant Member. I can do no better in this case than to reproduce the factual position mentioned by the learned Accountant Member in hi....