9911796707
TMI Blog1978 (2) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that it paid this amount as interest to each of the two male partners. Likewise, a sum of Rs. 6,648 was claimed in respect of the assessment year 1970-71. It is not disputed that the firm paid the interest in dispute on the investment brought in by the two partners, Radhey and Shri Krishna, and the payment of interest was made by crediting their accounts. The ITO rejected the claim for deduction. He held that after the death of the father, the sons got the share of the capital in their individual capacity and that, therefore, the payment was, in substance, to the partners of the firm which was prohibited. On appeal, the AAC took a different view. He held that, in law, the money inherited by the two sons Radhey Shyam and Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on after his death constituted their individual property and the subsequent reversing of the entries made in the books on April 4, 1968, was an after-thought and the payment of interest on these capital accounts was not a permissible deduction ? " We are unable to uphold the view of the Tribunal that the money inherited by the two sons from their father was their self-acquired or individual property. In law, it was ancestral property in their hands qua their sons. The position is made clear by para. 223 of Mulla's Hindu Law. The Tribunal has referred to a footnote, which says : " Where a number of sons inherit their father's self-acquired property, they hold it as a joint family property. But now see section 19(b) of the Hindu Success ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected in the books of account. But this does not improve the position of the assessee. It is now indisputable that the capital contributed by the sons was the money inherited from their HUF. The capital standing to the credit of their names in the firm's books was, in fact, money belonging to the HUF of which these two sons were the karta. Paragraph 4 of the partnership deed provided that the capital of partners Nos. 1 and 2 shall be such as may be invested by each of them according to the needs of the business and the capital of the third party, namely, the widow, shall be such as she should be entitled to receive as her share in accordance with the wishes of late Sheo Kant, her husband, It is thus clear that the two sons were bound to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
