TaxTMI 
TaxTMI 
2004 (9) TMI 71
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....c) of the Partnership Act was it not open to partners to change its course, when they realized that the interest on the debit balance of one of the partners was being charged erroneously, and the findings recorded by the Appellate Assistant Commissioner and confirmed by the Tribunal that the agreement dated February 20, 1975, was afterthought and not relevant are based on relevant consideration and liable to be sustained?" Briefly stated the facts giving rise to the present reference are as follows: The present reference relates to the assessment years 1976-77 and 1977-78. The applicant is a firm consisting of three persons, namely, Smt. Lilawati Narang, Shri V.P. Narang and Sri R.K. Narang. During the course of the assessment proceedings....
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....vague and unconvincing." In respect of the assessment year 1977-78 the Income-tax Officer once again enquired from the applicant as to why no interest has been charged on the debit balance in the account of Smt. Lilawati Narang. In its reply the applicant submitted that in view of the agreement dated February 20, 1975, the charging of interest was discontinued as the partners have felt that it was unfair of Smt. Lilawati Narang to be charged interest on the debit balance. The Income-tax Officer, however, included a sum of Rs. 18,888 in the total income of the applicant with the following remarks: "This argument put forth by the assessee has no force. Interest paid to the partner on the capital employed by the partners is a revenue expendi....
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.... Commissioner. In the appeal filed by the applicant for the assessment year 1976-77 the applicant also filed an application for bringing on record the additional evidence, i.e., agreement dated February 20, 1975. Upon objection being raised by the assessing authority, the Appellate Assistant Commissioner rejected the application for filing additional evidence. In both the appeals the Appellate Assistant Commissioner upheld the action of the Assessing Officer. She has found that the agreement alleged to be executed on February 20, 1975 was not genuine. Further such interest was charged on the debit balance in the past and further two partners were also paid interest on the credit balance in their respective accounts. Feeling aggrieved by th....
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....he agreement dated February 20, 1975 was not genuine is based on appreciation of evidence and materials on record and moreover the aforesaid finding recorded by the authorities was not specifically challenged by the applicant before the Tribunal. He, thus, submitted that the Income-tax Officer was justified in bringing to tax the amount of interest on the debit balance though not charged by the applicant firm. Having heard learned counsel for the parties we find that for the assessment year 1976-77 specific query was made by the Assessing Officer as to why proportionate interest be not disallowed as not incidental to business as Smt. Lilawati Narang was having debit balance specially when the firm was returning losses and had to pay intere....
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....he memo of appeal filed by the applicant before the Tribunal, copy of which is on record of the paper book, we do not find that any such plea like challenge to the finding regarding genuineness of the agreement dated February 20, 1975 was raised. In the absence of any challenge regarding the finding about the genuineness of the agreement dated February 20, 1975 the Tribunal was justified iii not going into that issue. Further having regard to the findings recorded by the Income-tax Officer and the Appellate Assistant Commissioner we do not find that the said findings suffer from any legal infirmity. So far as the question of the applicability of section 13 (c) of the Indian Partnership Act is concerned, we find that it only provides that if....