9911796707
TMI Blog1987 (5) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... comes : Assessment years 1983-84 1984-85 Rs. Rs. I. Interest on securities 5% Govt. of India Bonds, 1985 (TDS Rs. 14) 144 144 II. Other sources : Interest on Compulsory Deposit 2,162 2,248 Interest from Bank 168 39 -------------- ------------- Total Income 2,474 2,431 Less : Allowable deductions u/s 80L 2,474 2,431 -------------- ------------- Adjusted total income Nil Nil Agricultural income 500 500 -------------- ------------- In the words of the ITO, as per the assessment order dated 30-10-1985 for the assessment year 1983-84, the assessee received a certain sum of money on partial partition of the HUF properties, that Shri C.K. Venkitaram, the father of the assessee, invested the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had not been employing any method of accounting as such. After referring to the decisions in CIT v. Jug Sah Muni Lal Sah [1939] 7 ITR 522 (Pat.), Rattan Chand Dhawan v. CIT [1973] 87 ITR 660 (Punj. Har.), Lal Umesh Bahadur Pal v. CIT [1972] 86 ITR 751 (SC), Rani Bhawani Devi v. CIT (1962) 46 ITR 973 (All.), Smt. Sushila Devi Rampuria v. CIT [1982] 137 ITR 272 (Cal.), CIT v. Confinance Ltd. [1973] 89 ITR 292 (Bom.), and CIT v. Smt. Singari Bai [1945] 13 ITR 224 (All.), the ITO completed the assessment on the presumption that whether the interest was credited to the creditor's account or not in the books of the debtor, incomes had accrued to the assessee at the end of the respective financial years in the absence of any evidence t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partner. This is evident from the copy of accounts of the minor in the said firm filed before the Tribunal. It was the understanding between the father of the assessee and the said firm that the firm shall pay interest on the amount advanced if it earns adequate profit and that it would pay interest varying from 10% to 18% per annum depending upon the profit. The firm has been paying interest on the deposit ever since the amount was deposited at various rates -- 12%, 15% and 10% per annum. For the assessment years 1981-82 and 1982-83 the account of the assessee was credited with interest at the rate of 10% per annum only. The assessee had filed the returns of income admitting the interest credited by the said firm in his account. The ITO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm did not credit any interest on the amounts standing to the credit of the assessee for the accounting years 1982-83 onwards relevant for the assessment years 1983-84 onwards. Every year the assessee was admitting in his return of income the interest from the said firm on the basis of interest credited to his account in the books of the firm M/s. Cochin Tin Factory. This is the system of accounting usually followed by the assessee consistently in respect of the interest income from the said firm. The ITO has to compute the income in accordance with the method of accounting regularly employed by the assessee. Reliance is placed on the decision in CIT v. A. Krishnaswami Mudaliar [1964] 53 ITR 122 (SC). In respect of interest from banks, nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two assessment years. 4. The arguments of the departmental representative were to the following effect : In the case of money-lending, the rate of interest is normally determined by the creditor and not by the debtor depending upon the adequacy of the profits of the debtor. The conduct of the parties and the surrounding circumstances of the case show that the deposit was interest-bearing from the beginning. Reliance is placed on the orders of the AAC and the ITO. 5. We have considered the rival submissions. Admittedly there is no promissory note or written agreement as to the terms of the deposit and the payment of interest etc. in respect of the deposit made by the assessee with the firm M/s. Cochin Tin Factory. In order that income ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the crediting of the interest in the assessee's account the assessee cannot be said to have acquired any right to receive the interest. All along since the beginning of the deposit with the said firm the assessee has been showing in his returns of income the interest only on the basis of credit entries made in his account, copy of which is given to the assessee, in respect of interest in the books of account of the firm. This method of showing the interest income for income-tax purpose has been consistently followed by the assessee and accepted by the department till the assessment year 1982-83 as borne out by the facts on record. The said firm had paid the assessee interest at varying rates, namely, 10 to 15%, per annum. The assessee adm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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