TaxTMI 
TaxTMI 
1987 (3) TMI 141
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....e is aggrieved with the order of the CIT and has come in further appeal. 2. Certain relevant facts are now stated. The assessee is a firm, which dealt in Diesel Engines and Tractors and Auto spares in the accounting year ended on 31st March, 1984. It consisted of four partners, two of whom Shri B.L. Kalra and Shri A.L. Kalra were brothers and the other two Shri Sudesh Kumar Sharma and Randhir Chand Rana were not related to them. On 24th Jan., 1978, all the four partners opened Recurring Deposit Accounts with the Central Bank of India, Phagwara of Rs. 1,000 per month for a period of 61 months. The accounts were in the joint names of the partner and his wife. These Recurring Deposit accounts matured on 1st March, 1983, a date falling in th....
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....rest income accruing for each of these assessment years had been disclosed by the partners in their individual returns on accrual basis and assessments had been duly made on the partners on the interest income disclosed for each year. It is also a fact that obviously on account of limitation the CIT has passed the order under s. 263 for the last year of the running of R.D. accounts, which falls in the asst. yr. 1983-84 and that CIT had both in the show cause notice and in para 3 of his order has expressed the opinion that the whole of the interest income of Rs. 74,960 belonged to the assessee and the interest income constituted its income for the asst. yr. 1983-84. The assessee's counsel, Shri N.K. Sud, also stated at the hearing that the I....
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....s opened. Finally, it was pointed out that on the maturity of the accounts the interest earned was credited to the capital account of each partner. Reliance was placed on the Andhra Pradesh High Court decision in the case of CIT vs. Jethalal Nanji & Bros. (1987) 59 CTR (AP) 52 : (1987) 167 ITR 191 (AP) in which the High Court had gone by the intention of partners and reference was made to observations at pages 690 and 691. Attention was also invited to the facts of that case and the facts of the assessee's case being comparable. Another argument in the alternative was also raised that the entire amount of the interest could not be included in the assessment of the assessee firm for the asst. yr. 1983-84 when the system of accounting followe....
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....came that of the firm and it is these funds which have been also utilised to make deposits in R.D. accounts. It was also stated that the assessee is no longer disputing the fact that Home Savings Fund Account No. 1660 with the Central Bank of India in the names of four partners was the account of the firm and had the funds belonging to the firm. It was argued that considering the issue in the proper perspective no inference adverse to the assessee can be possibly drawn. 4. The departmental representative relied on the reasons given in the order of the CIT. He particularly emphasised that any asset appearing on the asset side of the balance sheet of the firm was apparently the property of the firm and since the R.D. accounts of the partne....
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....rt in the decision cited by the assessee CIT vs. Jethalal Nanji & Bros. has applied the same test to the evidence brought on record. In the instant case, we find force in the submissions of the assessee's counsel noted above, which bring out the relevant facts and conduct of the partners of the assessee-firm to show that the R.D. accounts were intended by the partners to belong to them personally and not to the firm. It is significant that the R.D. accounts were opened by each partner not only in his own name but in joint names of himself and his wife. The partners had no intention to show act as benami of the firm or to act on behalf of the firm to open these R.D. accounts. The CIT in para 6 of his order is wrong when he observes that appa....