1979 (7) TMI 125

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ng the disallowance of interest of Rs.1,333 on the debit balance in the account of Smt. Mohankumari, partner. 2. The assessee is a registered firm. During the asst. yr. 1976-77, relevant to the accounting period ending 31st March, 1976 the ITO found that one of the partners, Smt. Mohan Kumari, withdrew a sum of Rs. 40,000 on 20th Dec., 1975. The ITO also found that at the end of the accounting ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....y the lady partner. Considering these facts, he deleted the disallowance of Rs. 1,333 made by the ITO. Aggrieved the Department has come up in the present appeal. 3. After hearing the ld. representatives of the parties, we do not find any merit in this appeal. We find that on 20th Dec., 1975, when a sum of Rs. 40,000 was withdrawn by the lady, the debit balance in her account was only Rs. 15,94....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....orrowing by the firm on the above date. These facts clearly indicate that the amount advanced to the lady partner was not out of any borrowed funds, but it was directly advanced out of the deposits made by Shri Dilip Kumar, partner. In these circumstances, no disallowance of interest could be made on the debit balance in the account of the lady partner. The order of the CIT(A) is, therefore, confi....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....re fully entitled to make withdrawals from their individual accounts in the firm at any time and invest the money anywhere they liked. He found that in spite of the withdrawals made by the partners, there was still a credit balance in their individual accounts, and hence the financial arrangements made by the assessee firm with its partners did not militate against any provisions of the IT Act. Th....