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TMI Blog1985 (10) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties are the same and the question of law involved is also the same, these reference applications are being decided by a common order. In D. B. Income-tax Reference Application No. 76 of 1982 and 77 of 1982 the following question of law has been framed : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that interest paid by the assessee to the minors on the gifts made by the partners by mere book entries is an admissible deduction ? " In D. B. Income-tax Reference Application No. 165 of 1982 the following question of law has been framed: Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the Appellate Assistant Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family of the partners of the assessee firm. All these gifts were made by book adjustment entries. Later on, after the transfer of the said gifted amounts to the names of minors, the assessee-firm allowed interest upon those advances. The assessing authority did not allow the interest paid to the minors, as in his opinion, the assessee had failed to prove that the deposits are fresh borrowings made by the assessee firm for the purpose of the business. In fact, there had been no fresh borrowings but simple transfer of the amount from one account to the other and, therefore, the assessee could not claim deduction of the said amount of interest under section 36 of the Act. The assessee preferred an appeal before the Commissioner of Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... miserably failed to prove that these deposits are fresh borrowings for the purpose of the business and hence it is not deductible and allowable under section 36 or 37 of the Act. He has placed reliance on Madhav Prasad Jatia v. CIT [1979] 118 ITR 200 (SC) and Bombay Steam Navigation Co. (1953) Pvt. Ltd. v. CIT [1965] 56 ITR 52 (SC) and, since the assessee has failed to prove that the amount was borrowed for the business of the assessee-firm or there were fresh borrowings, the amount of interest paid on the deposits of the minors by way of gift by the partners of the firm cannot be deducted under sections 36(1) and 37 of the Act. On the other hand, learned counsel for the non-petitioner assessee has submitted that the gifts were made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the firm, the moneys stood transferred in the names of the donees, though minors, and the amount was utilised for the purpose of the business, it was fully covered within the meaning of section 36(1)(iii) of the Act. He has further submitted that whether the amount in question was being used by the assessee for the purpose of business or whether the amount was borrowed for the purpose of the business, is a pure finding of fact and does not involve any question of law whatsoever and hence this application should be dismissed. We have carefully considered the submissions and the authorities cited at the bar and have given our thoughtful consideration to the whole matter. The two partners of the firm, viz., Jorawar Mal and Sobhagmal, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrowings was a permissible deduction under section 36(1)(iii) of the Act. The question whether the amount was borrowed and used by the assessee firm for the purpose of its business is a finding of fact and this court cannot go beyond the same and since this finding is accepted, the interest paid on such borrowings is a deductible amount. Section 37 of the Act is very wide. Moreover, the Department itself has accepted the genuineness of the gifts made by the two partners, vide their assessment orders dated April 29, 1975, and which orders have become final and have not been challenged by the Department and since we have come to the conclusion that the amount of interest is an admissible deduction under section 36(1)(iii) of the Act, we need ..... X X X X Extracts X X X X X X X X Extracts X X X X
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