COMMISSIONER OF INCOME TAX Vs. BALAJI COMMERCIAL SYNDICATE

JUDGEMENT

(1.) THE following questions has been referred under section 256(2) of the Income-tax Act by the Income-tax Appellate Tribunal, Bangalore :

(2.) THE assessee is a firm of nine partners. In respect of each partner, two accounts were maintained for the assessment years 1974-75 and 1975-76 in the books of the firm. THE first one was a capital account and the second one was a drawing account. THE firm credited interest on the credit balance of the partners in the capital account and at the same time it charged interest on the debits to the drawing account. THE Income-tax Officer added the full amounts credited to the capital account of the partners without taking into consideration the amount of interest debited to the partners in their drawing account.

(3.) AGGRIEVED by the order of the Appellate Assistant Commissioner, the Department went up in appeal before the Tribunal in relation to the assessment for the year 1974-75. As against the order of the Appellate Assistant Commissioner for the year 1975-76, the assessee went up in appeal before the Appellate Tribunal.