9911796707
TMI Blog1978 (11) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... irm. In the assessee's personal account in the books of M/s. Soorajmull Nagarmull there was a debit balance. This debit balance was on account of drawings for personal expenses of the assessee and also due to the losses incurred by the firm and the apportionment of such losses to the account of the assessee. Interest was charged by the firm on this debit balance which came to Rs. 22,533. The assessee claimed deduction in respect of this interest charged. The ITO disallowed the claim. It was stated that in the last assessment that such debit balance comprising of business losses and personal drawings represented the personal liabilities, and the interest payable on such personal liabilities was not allowable against the income earned under a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the debit balance in the capital account of the assessee maintained in the books of the firm of Surajmull Nagarmull attributable to the assessee's share in the loss of the said firm is an allowable deduction in computing the assessee's share income from the said firm 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee can urge in the appeal before the Appellate Assistant Commissioner, the ground relating to the levy of interest under sections 139 and 215 ? 3. Whether, on the facts and in the circumstances of the case and on a correct interpretation of section 26 of the Income-tax Act, 1961, the Tribunal was right in holding that the shares of the assessee in the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at as it was interest paid in respect of the reduction in capital this is in the nature of capital expenditure and, accordingly, no such deduction is allowable. In support of his aforesaid contentions, Mr. Sengupta has relied on the following decisions: CIT v. Smt. Allareddy Sudarsanamma [1972] 83 ITR 759 (AP) and the case of M.S.P. Raja v. CIT [1976] 105 ITR 295 (Mad.). So far as the first submission of Mr. Sengupta is concerned, we are not in a position to accept the contention of Mr. Sengupta that this was a withdrawal. The Tribunal itself has made a distinction between the two types of cases. The Tribunal has found that this interest has been charged on two accounts, namely, interest charged on the debit balance due to the drawings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and circumstances of this case. In the case of CIT v. Smt. Allareddy Sudarsanamma [1972] 83 ITR 759 (AP), three assessees were partners of a firm having an one-third share each. They individually withdrew substantial amounts from the firm for personal expenses. The deed of partnership did not provide for the payment of any interest on the capital investments of the partners, but they had to pay interest to the firm in respect of their drawings. In the relevant accounting year, the assessee paid interest on their withdrawals from the firm. The claim made by the assessee for a deduction of the amounts paid towards interest to the firm from their share income, was negatived by the ITO and the AAC. On appeal, the Tribunal directed the ITO to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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