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TMI Blog1983 (1) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... (viii) Shri Surinder Kumar (HUF) (ix) Smt. Parsinni Devi (Individual) 3. The first five persons and ninth person were those creditors to whom payment of interest was made in the preceding year. During this year, they were paid a sum of Rs. 1,74,262. The remaining three persons are the creditors from whom funds were raised during this year. The assessee firm paid them a sum of Rs. 42,551. Both the sums aggregate to a sum of Rs. 2,16,813 for which a claim for deduction was made by the assessee, but was held as payment made to the partners of the assessee firm, which was liable to be hit u/s 40(b) of the Act. According to the ITO, these nine persons are close relatives of the partners and it was, for this reason, that the funds appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he books to the account of M/s Ramji Dass Sons, Jullundur on 8th April 1977. Subsequently, a sum of Rs. 8,10,000 was debited to the account of the remaining three creditors and a credit of similar amount was given to M/s Kirpa Ram Ramji Dass, Jullundur. According to the ITO, all these nine persons, to whom interest payment has been made, were the close relatives of the partners and, therefore, the assessee allowed a device to be used to frustrate the effect of s. 40(b) under which the payment of interest made to the partners of the firm were liable to be hit by the provision contained in s. 40(b). The device was that the surplus funds lying to the credit of the partners were allowed to be transferred to those of the creditors, who happene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness for which the assessee was entitled to claim deduction. He caused the addition to be deleted. It is against this order of the CIT (Appeals), the revenue is in appeal. 5. The revenue admitted that, in ITA No. 310(Asr)/1981 asst. yr. 1977-78 dt. 13th March 1982, the Tribunal had already decided the issue which had been raised by the revenue. But the departmental representative, submitted that the effect of two more decisions, one of Allahabad High Court reported in Premier Colonisers vs. CIT (1980) 17 CTR (All) 250 and another by Chandigarh Bench in the case of M/s Aggarwal Coal Co vs. CIT may be considered in this connection. As far as the counsel for the assessee was concerned, he placed his reliance on the aforesaid decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st because other firm had not used or utilised the assets transferred by another firm in their business. If the funds or assets had not been used or applied in business, there could not lie a claim for deduction of interest. It is not the finding of the ITO in this case that the funds lying to the credit of the nine creditors were not utilised or used in the business by the assessee firm. Therefore, the ratio of the Allahabad decision cannot apply. 8. As far as the ratio of Chandigarh decision is concerned, it is, Prima facie, inapplicable. In the Chandigarh decision, two firms had mutually transferred their capitals. The one firm has transferred its capital in exchange for the capital of the other firm. Transfers were effected on the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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