9911796707
TMI Blog1985 (2) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly, the assessment was reopened under section 147(a) of the Income-tax Act, 1961 (" tile Act "). In response to the notice under section 148 of the Act, the assessee filed a return showing total income of Rs. 99,113 being the income determined in the original assessment as modified on appeal. Before the Incometax Officer, it was stated by the assessee that the hundi loans were disclosed by the partners of the firm with interest under section 68 of the Finance Act, 1965. However, the Income-tax Officer rejected the contention of the assessee and held that since the payment of interest on bogus hundi loans has been claimed in the assessment of the firm, the interest must be added back in computing the total income of the firm. The Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present one. Therefore, the Tribunal followed the said order and dismissed the appeal of the Department. At the instance of the Commissioner, the following questions of law have been referred to this court under section 256(2) of the Act : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sum of Rs. 34,395 (Rupees thirty-four thousand three hundred and ninety-five only) being the interest paid by the assessee to its partners in respect of bogus hundi loans is an allowable deduction in computing the income of the assessee, registered firm, on the ground that the said amount had been subjected to tax as a result of disclosures made by the partners ? 2. Whether, on the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the head " Profits" and gains of business or profession ". Originally, the assessee-firm claimed that the loans had been obtained from third parties. Accordingly, interest claimed on the said loans was allowed by the Income-tax Officer. The partners of the assessee-firm made a disclosure petition under section 68 of the Finance Act, 1-965, declaring the amount covered by the said loans to the assessee-firm as their concealed income. By reason of the said declaration, the said loans must be deemed to have been advanced to the assessee-firm by its partners. If the loans were not genuine, the interest on such loans would not be allowable. If the loans are genuine in the sense that such loans have-come from the partners, the prohibition of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 40(b). Under the provisions of the Act, a registered firm bears the tax direct as also its partners are separately assessed in respect of the share of profits allocated to them out of the income of the registered firm. Section 67 of the Act provides the method of computing and allocating a partner's share in the assessed income of the firm. After the total income of the firm is computed, any interest, salary, commission or other remuneration paid to any partner is to be deducted from the total income of the firm and the balance is apportioned among the partners according to their respective shares. The amount of interest, salary, commission or other remuneration paid to a partner is to be added to the apportioned amount or adjus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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