2004 (11) TMI 517

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....nd Sagar and Sri Subhash Narain, respectively, the partners of the assesseefirm. It may be noticed that the balance standing to the credit of each partner is Rs. 4,87,894 and Rs. 4,62,362 as against which they have withdrawn sums of Rs. 3,37,249 and Rs. 3,47,500, respectively. but the interest was calculated on the amount standing to the credit of each partner before deducting the sums withdrawn. Since the interest thereon, as per the working of the assessee, works out to less than 18 per cent., the assessee claimed deduction of entire interest under section 40(b) of the Act. The Assessing Officer observed that in order to work out the credit balance, the withdrawals during the year should be taken into consideration and thus only on the ne....

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....and, the learned Departmental Representative submitted that even as per the partnership deed the amounts standing to the credit of the partners capital account should be taken into consideration and not the future profits, etc. Since the partners are entitled to profit, etc., at the end of the year when the accounts are finalized, amounts can only be said to have been withdrawn against the balance standing to the credit of each partner in which event there would be depletion in the credit balance and the assessee having paid interest at less than 18 per cent., only that percentage of interest referable to the net credit balance is allowable as deduction. He thus strongly relied upon the orders of the authorities below. We have carefully ....

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....case of the assessee that as per the partnership deed the partners have agreed to share the profits from day-to-day or even from month to month basis. In fact there is no calculation provided to the Bench in this regard. Learned counsel merely adopted the final share of profit to explain the withdrawals as though the share of profit was withdrawn by the partners leaving the capital untouched. There is no working as to the date of withdrawals and the date on which the amount of remuneration, interest or profit is accrued to the partners so as to claim that the withdrawals are against the share of profit/remuneration/interest, alleged to have accrued to the partners. The conduct of the assessee of not crediting the partners accounts with the ....