TaxTMI 
TaxTMI 
1985 (10) TMI 75
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....law arising out of its order dated August 29, 1980, for the decision of this court. Since the parties are the same and the question of law involved is also the same, these reference applications are being decided by a common order. In D. B. Income-tax Reference Application No. 76 of 1982 and 77 of 1982 the following question of law has been framed : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that interest paid by the assessee to the minors on the gifts made by the partners by mere book entries is an admissible deduction ? " In D. B. Income-tax Reference Application No. 165 of 1982 the following question of law has been framed: Whether, on the facts and in the circumstances of....
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....e partners. Partners of the firm (assessee) gifted various sums to the minors who are members of the family of the partners of the assessee firm. All these gifts were made by book adjustment entries. Later on, after the transfer of the said gifted amounts to the names of minors, the assessee-firm allowed interest upon those advances. The assessing authority did not allow the interest paid to the minors, as in his opinion, the assessee had failed to prove that the deposits are fresh borrowings made by the assessee firm for the purpose of the business. In fact, there had been no fresh borrowings but simple transfer of the amount from one account to the other and, therefore, the assessee could not claim deduction of the said amount of interest....
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....here was no fresh borrowing by the assessee firm for the purpose of the business and the assessee has miserably failed to prove that these deposits are fresh borrowings for the purpose of the business and hence it is not deductible and allowable under section 36 or 37 of the Act. He has placed reliance on Madhav Prasad Jatia v. CIT [1979] 118 ITR 200 (SC) and Bombay Steam Navigation Co. (1953) Pvt. Ltd. v. CIT [1965] 56 ITR 52 (SC) and, since the assessee has failed to prove that the amount was borrowed for the business of the assessee-firm or there were fresh borrowings, the amount of interest paid on the deposits of the minors by way of gift by the partners of the firm cannot be deducted under sections 36(1) and 37 of the Act. On the o....
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.... that there should be a fresh borrowing every year or every time and, when after the gift by the partners of the firm, the moneys stood transferred in the names of the donees, though minors, and the amount was utilised for the purpose of the business, it was fully covered within the meaning of section 36(1)(iii) of the Act. He has further submitted that whether the amount in question was being used by the assessee for the purpose of business or whether the amount was borrowed for the purpose of the business, is a pure finding of fact and does not involve any question of law whatsoever and hence this application should be dismissed. We have carefully considered the submissions and the authorities cited at the bar and have given our though....