COMMISSIONER OF INCOME TAX Vs. KOTHARI AND CO

JUDGEMENT

(1.) THIS is a reference under section 256(1) of the Income-tax Act, 1961. The Tribunal has referred the following question :

(2.) SHRI Sohanraj Jain is one of the partners of the assessee-firm. He had two accounts, one capital account and the other house property account. Both the accounts are in the books of the assessee-firm. In the capital account, on the money lent to the firm, interest of Rs. 6,954 was credited. In the house property account, on the money borrowed by him from the firm, interest of Rs. 9,135 was debited. The assessee claimed before the Income-tax Officer that it should be the net interest that has to be taken into consideration for the purpose of assessment. Thus, he calculated the difference of Rs. 2,181 which, according to him, alone could be included in the total income. The Income-tax Officer, however, did not accept the claim. He held that the entire interest paid by the firm, viz Rs. 9135 paid by the partner to the assessee-firm was concerned, he held that it constituted income of the firm.

(3.) THE Tribunal, following the two decisions of the Allahabad High Court in Sri Ram Mahadeo Prasad v. CIT [1953] 24 ITR 176 and CIT v. Kailash Motors , agreed with the view taken by the Commissioner. (Appeals).