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TMI Blog1976 (5) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... s there being capital accounts of partners representing their HUFs in which debits and credits of certain items including interest and profit (the figure of interest being Rs. 506 in the name of Shri Pratap Narain, HUF (partner) and Rs. 416 in the name of Shri Triyugi Narain HUF (partner), there were two other accounts in the individual names of Shri Pratap Narain (individual) and Shri Triyugi Narain (individual) also in the books of account of the firm. In these accounts of two persons there are certain opening credit balances on which interest was charged and amounted to Rs. 25,259 and Rs. 12,837 respectively. The ITO required the assessee to explain as to why interest paid to the individual accounts should not be treated as interest paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip Deed recites that the partners Shri Triyugi Narain and Shri Pratap Narain have entered into the partnership as Karta of their respective small HUFs detailed in the preamble………" It was stated that the narration in the account books of respective accounts would clear the position. Copies of accounts of the two respective HUFs and the two individual parsons have also been filed before us. Copies of assessment orders for the two individuals and the two HUFs of the two parsons mentioned above have also been filed to show that the interest income of Rs. 12,838 and Rs. 25,280 has been taxed in the individual hands of Shri Triyugi Narain and Shri Pratap Narain respectively. It was stated that there was no dispute in regard to the disallowances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce was placed on the cases reported in 58 ITR 312 (A.S.K. Rathnaswamy Nadar Firm vs. CIT), 69 ITR 890 (Girdhamlal Ghasiram vs. CIT), 73 ITR 162 (CIT vs. Veeriab Reddiar), 76 ITR 123 (CIT vs. Ram Laxman Sugar Mills), 81 ITR 624 (Pannalal Girdharilal vs. CIT) 101 ITR 348 : 1975 CTR (Kar) 78 (N.P. Anniah Co. vs. CIT) besides the one referred to by the ITO in the assessment order i.e., 77 ITR 10. 5. We have given our careful consideration in the matter after hearing the submission of the parties and gone through the record of the case. For the purpose of determining as to who are, in fact, the partners in the firm, we have to look into the terms and conditions of the Partnership Deed itself. In the instant case, it is clearly stated in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mself given two separate treatments to those two items and identities. The case of Aggarwal Co., referred to by the ITO is only for the proposition that for the purpose of determining as to who is the partner, one should not travel beyond the terms and conditions of the partnership deed itself. In our opinion, s. 40(b) does not create absolute bar and the onus lies on the Department before the interest paid to an individual is disallowed to show that the cash was paid not to an individual creditor but to partner of the firm. The case reported in 76 ITR 123 relied upon by the Departmental Representative was considered in a later decision in the Full Bench of Allahabad High Court in 90 ITR 73. In our opinion, the case relied upon by the Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X
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