9911796707
TMI Blog1978 (8) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Prabhat Kumar, constituted a partnership firm called M/s. Bhauram Jawahirmal, the assessee before us. On 22nd August, 1960, Murari Lal purported to make a gift of Rs. 10,000 to his sister, Saroj Kumari. On September 21, 1960, Brij Mohan purported to make a gift of Rs. 10,000 to his second daughter-in-law, Sita Devi. The gifts were effected by transfer entries in the books of the assessee-firm. For the assessment year 1961-62, the assessee claimed deduction of interest credited in the accounts of Saroj Kumari and Pushpa Devi by reason of the amounts gifted to them on August 23, 1960, and September 21, 1960. The ITO repelled the claim. Equally so the AAC held that these were cross-gifts. The assessee took the matter in appeal before the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one made subsequently on October 22, 1960, by Brij Mohan to Smt. Sita Devi. The ITO and the AAC both disallowed the deduction on the common ground that the assessee did not pursue the matter further for these years. On August 6, 1971, the assessee filed an application for rectification under s.154 of the I.T. Act, 1961. The assessee prayed that on the basis of the judgment of this court in the reference for the year 1961-62, the interest paid on the aforesaid gifts may be deducted from its income, inter alia, for the years 1962-63 and 1967-68. The AAC rejected the application. On appeal, the Tribunal upheld the order of the AAC. At the instance of the assessee, the Tribunal has now referred the following question of law for our opinion: " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontains a statement of law which is much too wide. Although it will be difficult to lay down the circumstances under which a mistake discovered in an assessment order on the basis of a subsequent judgment of the High Court would be a mistake apparent on the record, one thing is clear to us : where an order of assessment is based upon a decision of the Tribunal which was the subject-matter of reference to the High Court, when the order was made, then any error discovered in the order, on the basis of the subsequent judgment of the High Court on that reference, would be an error apparent from the record. We say so because, in the circumstances, it will be assumed that the law declared by the High Court, even if such declaration was made subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lal Kejriwal. The Tribunal has held that on the date the gifts were made there was no sufficient cash balance available with the firm to enable those partners to make the gifts. The Tribunal accordingly upheld the disallowance of interest on the gifts made by Sri Brijmohan Kejriwal and Sri Murari Lal Kejriwal in favour of Smt. Pushpa Devi and Smt. Saroj Kumari for the same reasons. The I.T.O. is justified in disallowing the interest payment of Rs. 600 to Smt. Sita Devi on the gift of Rs. 10,000 made by Sri Brijmohan Kejriwal. The disallowance is upheld. 4. The 4th objection relates to the disallowance of Rs. 600 for interest paid to Smt. Pushpa Devi and Rs. 600 for interest paid to Smt. Saroj Kumari on the gifts of Rs. 10,000 made to ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out to Rs. 1,950 in the case of Smt. Sita Devi, Rs. 1 950 in the case of Smt. Saroj Kumari and Rs. 975 in the case of Smt. Pushpa Devi. In other words, the disallowance is reduced by Rs. 563." Thus, for the year 1962-63, the AAC invalidated the aforesaid gifts and disallowed the deduction for interest based thereon merely on the ground that on the relevant dates the assessee-firm did not have sufficient cash balance available in its books to enable the concerned partners to make these gifts. He came to this conclusion relying on the view taken by the Tribunal in the assessment year 1961-62. As already stated, the Tribunal's view did not find favour with this court. This court held that the gifts could not be invalidated merely on the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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