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Issues:
1. Charging of interest on debit balances in the accounts of partners and their family members. 2. Disallowances under s. 80-VV of the IT Act, 1961. Analysis: Issue 1: Charging of interest on debit balances The appeal pertains to the charging of interest on debit balances in the accounts of partners and their family members for the assessment years 1977-78 and 1978-79. The controversy revolves around the interest rate charged, with the assessee charging 13.5 per cent, the CIT (A) reducing it to 15 per cent from the initial 18 per cent. The Tribunal considered the details of the accounts and fresh deposits received during the years. Specifically, the account of one partner, Shri Lalit Nirula, was scrutinized as it was the subject of addition for both years. The Tribunal noted that the debit balances did not increase during the relevant accounting period for 1977-78, and the interest charged at 13.5 per cent was deemed justified. Therefore, the addition sustained by the CIT (A) for both years was deleted. Similarly, for 1978-79, the Tribunal found that the debit balances did not increase significantly and the interest charged was in line with the borrowings, leading to the deletion of the addition. Issue 2: Disallowances under s. 80-VV of the IT Act In addition to the interest issue, the assessee raised a grievance regarding disallowances under section 80-VV of the IT Act for the assessment year 1978-79. The assessee relied on a decision of the Income Tax Tribunal to support their contention for sustaining the disallowance. The Tribunal set aside the lower authorities' order on this issue and directed the CIT (A) to re-decide the disallowance under section 80-VV in line with the referenced decision. The assessee was deemed to have succeeded for statistical purposes on this issue. In conclusion, the Tribunal allowed the appeal for the assessment year 1977-78 and partially allowed the appeal for the assessment year 1978-79, with part of the decision being for statistical purposes.
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