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TMI Blog1983 (9) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... e started this interest was from fixed deposits of the value of Rs. 1,50,000. The claim of the assessee was that the amount of fixed deposits was property of all the partners and the interest was, therefore, assessable only in the hands of the partners proportionately. The ITO stated that the amount deposited in the bank was out of the funds available with the firm and hence the interest received from the bank on such deposits would be the income of the firm. 2. In appeal, the CIT(A) did not accept the plea of the assessee that the interest was not taxable n the hands of the assessee. The assessee had contended that each of the partners had declared 1/7th share of interest in their individual returns but, nevertheless, the CIT(A) was of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere admittedly purchased out of the firm's funds and were also exhibited in the balance-sheet of the firm as at 21st Oct., 1979 and 7th July, 1980 and it was only thereafter that amounts were transferred. He, therefore, stated that the presumption was that the deposits belonged to the firm and, therefore, the interest attributable to the deposits had to be included only in the hands of the firm. According to him, merely because in an earlier year proportionate income was returned by the partners and assessed as such, there was no bar to a correct assessment being made in this year. 5. We have considered the rival submissions. The provisions of s. 14 of the Indian Partnership Act, 1932, read as under: "Subject to contract between the partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interregnum, from the date of acquisition of the deposits till the date of transfer, the proportionate interest was shown in the separate returns of each partner and it was clearly mentioned that each partner had a 1/7th share. The declarations made by each partner while filing the computation of income that each had a 1/7th share is, in our view, an expression of intention viz., that though the deposits were acquired with the funds of the firm, they belonged to the partners, especially when each of the partners had sufficient capital account balance at the time of making the deposits to pay for his or her respective share if adjustments were made on that date. In these circumstances, the mere fact that the adjustment entries adjusting th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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