INCOME TAX OFFICER v. KANHAYA LAL KRISHAN BALDEV
[Citation -1985-LL-0719-4]

Citation 1985-LL-0719-4
Appellant Name INCOME TAX OFFICER
Respondent Name KANHAYA LAL KRISHAN BALDEV
Court ITAT
Relevant Act Income-tax
Date of Order 19/07/1985
Assessment Year 1980-81
Judgment View Judgment
Keyword Tags interest paid • karta
Bot Summary: The said action of the ITO was reversed by the AAC when the matter came before him, who based his finding on another decision in the case of Kanhaya Lal Rameshwar Dass Co. in appeal No. 6-II Pt/83-84 for the asst. Departmental Representative Mr. C.L. Jain submitted that it was on the strength of Gujarat High Court decision in the case of CIT vs. Sajjanraj Diwanchand 21 CTR 26: 126 ITR 654 that the said action of the assessee was accepted. Since there is a Full Bench decision in which the said Gujarat High Court decision stands reversed, earlier decision of the Tribunal in this respect in the case of Ganesh Factory in I.T.A. Nos. Counsel for the assessee Mr. H.K.L. Bajaj, on the other hand, submitted that the issue is covered against the Revenue by earlier decision of the Chandigarh Bench and also as per Gujarat High Court decision in CIT vs. Sajjanraj Diwanchand 21 CTR 26: 126 ITR 654. In the light of above finding of the Full Bench and earlier decision having been overruled, which was relied upon by the Tribunal in earlier cases, and also finding that this is the only Full Bench decision available on the issue which goes against the assessee, earlier decision of the Tribunal has to be reviewed and the issue decided in favour of the Revenue. We are unable to confirm the action of the AAC. We are persuaded to have a different view then before because of Full Bench decision in Chhotalal Sons vs. CIT 44 CTR 149: 150 ITR 27 whch overrules earlier decision in CIT vs. Sajjanraj Devanchand 21 CTR 26: 126 ITR 654. Since the learned counsel for the assessee was not in a position to bring any other decision to our notice from Full Bench of any other High Court even Gujarat High Court decision has got to be followed, as per Godawari Devi s case.


F.C. RUSTAGI, J.M.: This is Departmental appeal in which ground raised reads as under: 'On facts and in circumstances of case, ld. AAC has erred in deleting addition of Rs. 10,085 representing interest paid by assessee- firm on capital contributed by Shri Rameshwar Dass, partner in spite of clear provisions of s. 40(b) of IT Act, 1961. In course of assessment proceedings, interest paid to Rameshwar Dass Yoginder Mohan HUF in sum of Rs. 10,085 was added back. said action of ITO was reversed by AAC when matter came before him, who based his finding on another decision in case of Kanhaya Lal Rameshwar Dass & Co. in appeal No. 6-II Pt/83-84 for asst. yr. 1982-83. It was for reasons given therein that AAC accepted contention of assessee. While disputing said order, ld. Departmental Representative Mr. C.L. Jain submitted that it was on strength of Gujarat High Court decision in case of CIT vs. Sajjanraj Diwanchand (1981) 21 CTR (Guj) 26: (1980) 126 ITR 654 (Guj) that said action of assessee was accepted. However, since there is Full Bench decision in which said Gujarat High Court decision stands reversed, earlier decision of Tribunal in this respect in case of Ganesh Factory in I.T.A. Nos. 1011 etc./79, which was based on (1980) 126 ITR 654 (Guj) (supra), deserves to be reviewed. He cited in case of Chhotalal & Co. vs. CIT (1985) 44 CTR (Guj) 149: (1984) 150 ITR 276 (Guj)(FB). ld. counsel for assessee Mr. H.K.L. Bajaj, on other hand, submitted that issue is covered against Revenue by earlier decision of Chandigarh Bench and also as per Gujarat High Court decision in CIT vs. Sajjanraj Diwanchand (1981) 21 CTR (Guj) 26: (1980) 126 ITR 654 (Guj). After taking into consideration rival submissions and looking to latest position of law on issue, we are constrained to have different view than taken by us in I.T.A. 701/Chandi/1982 ITO vs. Kanhaya Lal Krishan Baldev (asst. yr. 1979-80), copy of which was made available by ld. counsel for assessee for our perusal. Undoubtedly, when we peruse earlier decision we find it supports contention of assessee. But we also find that we had actually relied on (1980) 126 ITR 654 (Guj) (supra), which decision now stands overruled. Their Lordships of Gujarat High Court in Full Bench decision have made following observations at p. 287 of report: '.......... We are not persuaded to agree with approach made in case reported in CIT vs. Sajjanraj Divanchand (1981) 21 CTR (Guj) 26: (1980) 126 I T R 654 (Guj) for reason we have explained herein. We think that that decisions has necessarily to be overruled. Then, summarise, their Lordships have held that: 'Once we accept situation that contracting partner alone are bound by terms of contract and it is open to Revenue to see partners as he really is, it goes without saying that when he represents HUF interest paid to HUF has to be disallowed and not any interest paid in to his individual account as interest in lieu of advance made by him personally. Even if he happens to be Karta of HUF but he becomes partner in his own account and amounts are advanced to firm by him from his individual account and also by HUF, amount of interest paid to HUF account cannot be disallowed, while interest paid in his account has to be disallowed. That is not situation here. In light of above finding of Full Bench and earlier decision having been overruled, which was relied upon by Tribunal in earlier cases, and also finding that this is only Full Bench decision available on issue which goes against assessee, earlier decision of Tribunal has to be reviewed and issue decided in favour of Revenue. We are, therefore, unable to confirm action of AAC. We are persuaded to have different view then before because of Full Bench decision in Chhotalal & Sons vs. CIT (1985) 44 CTR (Guj) 149: (1984) 150 ITR 27 (Guj) whch overrules earlier decision in CIT vs. Sajjanraj Devanchand (1981) 21 CTR (Guj) 26: (1980) 126 ITR 654 (Guj). Since learned counsel for assessee was not in position to bring any other decision to our notice from Full Bench of any other High Court even Gujarat High Court decision has got to be followed, as per Godawari Devi s case. action of AAC is, therefore, reversed. In result, appeal is allowed *** INCOME TAX OFFICER v. KANHAYA LAL KRISHAN BALDEV
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