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TMI Blog2020 (12) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... cial expediency - HELD THAT:- The partner has withdrawn his own funds from his current account with the firm. It cannot be said that the assessee's funds should be used for business purposes only and the partners' cannot withdraw their money which leads to the firm borrowing interest bearing funds. In our opinion, this issue is squarely covered by the decision of this Tribunal in the case of S. Jameela vs. ACIT [ 2012 (7) TMI 1117 - ITAT COCHIN ] As gone through the reconstituted partnership deed dated 31st March, 1994 and 28th June, 2018. As per the latest reconstituted partnership deed dated 28th June 2018, clause 6 specifically mentions that the partners are at liberty to withdraw any amount from the partnership against the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priate proceedings, if arises, in future. At the same time, we also make it clear that if the appeal falls in any of the exceptions referred to in the above said CBDT Circular, the Revenue is at liberty to move an application for recalling the order, if so, advised. Accordingly in the light of CBDT Circular No. 17/2019 dated 08/08/2019, the appeal filed by the Revenue stands dismissed. 3. Next, we shall take up the assessee's appeal in ITA No. 62/Coch/2020 for the assessment year 2007-08. The assessee has raised the following grounds of appeal: 1. The Order of the Commissioner of Income Tax(Appeals), Trivandrum is against law, facts and circumstances of the case. 2. The CIT(Appeals) has erred in following the decision of the Kerala High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29,49,690/- as on 31.03.2007. Verification of the current account of partner Abdul Rehman Kunju showed that Shri Abdul Rehman Kunju had effected drawings of ₹ 46,77,466/-. The details regarding the drawings were called for from the assessee. As per the details filed, out of the drawings, an amount of ₹ 36,68,000/- had been gifted by the assessee to Shri Hamsa Ramla and Sirajudeen. The Assessing Officer proposed to disallow a portion of bank interest on the ground that interest bearing funds had been diverted for non business purposes. The Assessing Officer observed that the purpose of making the gift was not explained by the assessee and the assessee has also not proved that the gift was made by the assessee out of commercial ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 1,29,49,690/- was ₹ 3,33,896/-. The Ld. AR submitted that the capital and current account balance of this partner in the firm as on 01/04/2006 was ₹ 8,78,50,660.40, his share of profit for this year was ₹ 15,89,498.67. The Ld. AR submitted that even after the withdrawal of ₹ 46,77,466/-, the credit balance in the capital and current account of the assessee was ₹ 8,47,62,693.07. The Ld. AR relied on the judgment of the Supreme Court in the case of Hero cycles Pvt. Ltd. vs. CIT 379 ITR 347 wherein it was held that when the assessee had sufficient own capital, he can utilize that fund for non business purposes and no disallowance can be made for diversion of funds. The Ld. AR also relied on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersion of funds does not arise at all, as the assessee has stated the purpose of making the deposits and purchasing the shares. It is further to be noticed that these deposits have been made by the assessee in her name/concern's name and the said deposits have been disclosed in the assessee's books of accounts. In the instant case, there may be many reasons for the assessee to park funds in the form of deposits with the Bank, from whom she has obtained loans. It is a known fact that a prudent businessman will not normally make deposits in the Bank which usually fetches lower interest, by using the loan funds on which he is liable to pay interest at a higher rate, unless there is some business compulsion for doing so. It is also well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct the Assessing Officer not to treat the same as diversion of funds. 8.1. In this case of Shri Abdul Rehman Kunju, the current account with the firm is as follows: Shri Abdul Rehman Kunju Date 01-04-2004 Opening balance 84,76,410.71 Drawings for the year 46,77,466.00 31-03-2005 Profit for the year 15,89,498.67 31-03-2015 Cl./B/L 53,88,443.38 Total ₹ 1,00,65,909.38 ₹ 1,00,65,909.38 Thus, the partner has withdrawn his own funds from his current account with the firm. It cannot be said that the assessee's funds should be used for business purposes only and the partners' cannot withdraw their money which leads to the firm borrowing interest bearing funds. In our opinion, this issue is squarely covered by the decision of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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