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Issues: Disallowance of interest claimed as deductions under s. 40-A(8) for assessment years 1980-81 and 1981-82. Interpretation of whether the interest payments constituted deposits under the said provision.
In this case, the Appellate Tribunal ITAT Delhi-A heard two appeals together involving common contentions related to the disallowance of interest claimed as deductions under s. 40-A(8) for the assessment years 1980-81 and 1981-82. The assessee, a Private Ltd. Company, contested the disallowance made by the ITO, which was based on s. 40-A(8) of the Act. The CIT(A) dismissed the appeals for both years, stating that the interest payments to certain parties constituted deposits as defined in the Explanation to s. 40-A(8). The CIT(A) upheld the disallowance based on the nature of the transactions and the character of the accounts involved. The assessee then appealed further. During the appeal before the Tribunal, the authorized representative of the assessee argued that the amounts paid to the parties were not deposits as they were withdrawals made from the accounts during the relevant years. The representative referred to a previous Tribunal order where a similar disallowance was deleted for a different assessment year. The Tribunal, considering the submissions, held that the amounts did not qualify as deposits under s. 40-A(8) and that the disallowances should be deleted. The Tribunal emphasized that the interpretation favoring the assessee should be preferred, as per settled law, and ruled in favor of the assessee, modifying the assessment accordingly. Another objection raised by the assessee under s. 80J for both years was not pressed by the representative in light of a retrospective amendment of the provision. The Tribunal rejected these objections. Consequently, the appeals were allowed in part, with the disallowances under s. 40-A(8) being deleted. The Tribunal's decision was based on the interpretation of the law and the specific facts of the case, ultimately ruling in favor of the assessee based on the arguments presented and the precedent set by previous Tribunal orders.
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