NIRULA'S CORNER HOUSE v. INCOME TAX OFFICER
[Citation -1986-LL-1222-1]

Citation 1986-LL-1222-1
Appellant Name NIRULA'S CORNER HOUSE
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 22/12/1986
Assessment Year 1977-78, 1978-79
Judgment View Judgment
Keyword Tags rate of interest • registered firm • excess interest • interest paid
Bot Summary: S.P. KAPUR, J.M. The assessee, a resident registered firm is in appeal in relation to asst yrs. The common and the sole controversy revolves around charging of interest on the debit balances in the accounts of Shri Lalit Nirula, Shri Nalin Nirula and Shri Deepak Nirulal; said to be partners and their family members of the assessee firm. Assessee's paper-book has been taken into account, which, inter alia, contains copies of Shri Lalit Nirula, Nalin Nirula and Deepak Nirula, in the account books of the assessee-firm. At our asking copy of account of Shri Lalit Nirula in details has been placed on our file, since this is the only account that merits consideration and is the subject matter of addition as sustained by the ld. In the face of debit balance in the accounts, when there has been no increase during the accounting period relevant to asst. CIT the debit balance is, much less that the borrowing at the maximum rate of 13.5 per cent, interest charged at 13.5 per cent, was justified. The net result is that addition in lieu of charge of excess interest on debit balances in the accounts of partners and their family members for both the years stands deleted.


S.P. KAPUR, J.M. assessee, resident registered firm is in appeal in relation to asst yrs. 1977-78 and 1978-79 for which relevant previous years ended on 31st March, 1977 and 31st March, 1978. 2 . common and sole controversy revolves around charging of interest on debit balances in accounts of Shri Lalit Nirula, Shri Nalin Nirula and Shri Deepak Nirulal; said to be partners and their family members of assessee firm. 3. For both years assessee charged interest @ 13.5 per cent while ld. CIT (A) made it 15 per cent as against 18 per cent charged at assessment stage. 4 . Parties have been heard at length. Orders of ld. Lower authorities have been duly noted. Assessee's paper-book (14 pages) has been taken into account, which, inter alia, contains copies of Shri Lalit Nirula, Nalin Nirula and Deepak Nirula, in account books of assessee-firm. List of fresh deposits received during years along with rate of interest has also been placed on our file. 5 . At our asking copy of account of Shri Lalit Nirula in details has been placed on our file, since this is only account that merits consideration and is subject matter of addition as sustained by ld. CIT (A) for both assessment years. addition stands at Rs. 10,070 for asst. yr. 1977-78, and Rs. 10,767 for asst. yr. 1978-79. 6. In impugned order made for asst. yr. 1977-78, ld. CIT (A) has detailed in paragraph 3.4 that, during year interest paid on various borrowings was as under: . Rs. . "On 16,956 Nil On 21,837 9per cent On 25,250 12per cent On 3,07,300 13.5 per cent On 6, 27 ,368 15per cent On 19,500 18per cent On 86,500 24per cent 7 . In face of debit balance in accounts, when there has been no increase during accounting period relevant to asst. yr. 1977-78 and even according to ld. CIT (A) debit balance is, much less that borrowing at maximum rate of 13.5 per cent, interest charged at 13.5 per cent, was justified. addition sustained by ld. CIT(A) by applying interest at rate of 15 per cent on facts was not warranted. We hold accordingly with result, that additions sustained by ld. CIT(A) stands deleted. 8 . For asst. yr. 1978-79, facts remain same as also debit balance position vis-a-vis borrowings bearing no interest, interest @ 9 per cent, 12 per cent and 13.5 per cent respectively, hence addition for this year was also not warranted on facts since debit balances have no increased and additionally there were, much less, than borrowings interest which is being charged on debit balances. Addition sustained for asst. yr. 1978-79 at Rs. 10,767 accordingly stands deleted. 9. net result is that addition in lieu of charge of excess interest on debit balances in accounts of partners and their family members for both years stands deleted. 10. For asst. yr. 1978-79, second grievance of assessee is about disallowances under s. 80-VV of IT Act, 1961. assessee relies before us on decision of Income tax Tribunal, reported in Ruia Stud and Agricultural Farms (P) Ltd. vs. Sixth ITO (1985) 23 TTJ (Bom) 559 : 1985 14 ITD 429 (Bom). He accordingly contends that disallowance be sustained accordingly. 11. On this issue, setting aside order of ld. Lower authorities to this limited extent, we direct learned CIT(A) to re-decide issue of disallowance under s. 80-VV of Act in tune with above decision. On this issue, assessee shall be deemed to have succeeded for statistical purposes. 12. In net result, ITA No. 1391 (Del) of 1985 involving asst. yr. 1977-78 succeeds and stands allowed, while ITA No. 1392 (Del) of 1985 succeed partially, on merits and other part, for statistical purposes. *** NIRULA'S CORNER HOUSE v. INCOME TAX OFFICER
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