TaxTMI 
TaxTMI 
1982 (5) TMI 105
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....t payments to the members of an association of persons were wrongly claimed and allowed. The ITO observed that the interest payments claimed were not allowable under section 36(1)(iii) of the Act, because the interest was paid only on the investments made by the proprietors of the business. He further observed that this was the position of law contained in the case of Mian Channu Factories Union v. CIT [1936] 4 ITR 203 (Lahore). He further observed that the ruling relied on by the assessee in the case of CIT v. Harnandrai Shrikishan Akodia [1966] 61 ITR 50 (MP) took a different view, but then, in view of conflict of opinions, the revenue would necessarily rely upon the decision which is in its favour. He brought to assessment interest payme....
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....e issue in this case and therefore it is not applicable to the facts of this case. He pointed out that on the other hand, the ruling of the Madhya Pradesh High Court in Harnandrai Shrikishan Akodia is a direct authority on the point and clearly supported the assessee's contention. He further submitted that there is no conflict of judicial opinions whatsoever, as pointed out by the ITO and that there was no justification for disallowing the interest claimed. The learned counsel made a further submission that the interests in question were already assessed in the hands of the members of the association of persons, and, therefore, the present assessment seeking to bring to tax, the same income amounts to double assessment which is not authoris....
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....ests paid (as detailed below) to the members of AOP were admitted and assessments completed. Hence the refund of Rs. 6,253 ordered in the RO cited is not in order. This resulted in a short demand of Rs. 19,000 (approximately) in the hands of the above assessee for the A.Ys. 1974-75 to 1977-78. Sd/- Receipt Audit Officer." A plain reading of the above note, clearly shows that the above audit note has expressed an opinion on a point of law. No reference was also made to any judgment of the High Court or the Supreme Court. The question that arises now is whether the reassessments made on the basis of the above audit note are valid in law. In other words, the question is whether the opinion expressed in the audit note would amount to 'inform....
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.... get interest at the rate of 10 per cent per mensem. The Lahore High Court held that the money thus used cannot be considered as capital borrowed for the purpose of business. Further, the above judgment of the Lahore High Court has only persuasive effect, after the inauguration of the Republic of India in the year 1950. The decision of the Madhya Pradesh High Court referred to above is not only directly on the point in issue but there is also no other decision of either the Andhra Pradesh High Court taking a contrary view. In such a situation the following observations of the Bombay High Court, in the case of CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589, could apply : "... an authority like an Income-tax Tribunal acting anywhere in th....