GOVINDARAJ GANESH ENTERPRISES REP. BY ITS PARTNER, K.S. GOVINDARAJ S/O LATE K.V. SHANTARAJ SETTY Vs. THE INCOME TAX OFFICER

JUDGEMENT

(1.) HEARD Mr. Parathasarathi, the learned Counsel for the appellant and so also Mr. Aravind, appearing for the Revenue.

(2.) THIS appeal is filed challenging the concurrent findings of the three authorities including the Tribunal, holding that the income earned by the appellant firm for the year 1997 -1998 has to be taxed, by raising the following substantial questions of law: a) Whether the interest income derived by the firm from lending its capital only to its partners where no outsiders have been involved is exempted from taxation on the principles of mutuality? b) Whether the fact that the firm is treated as a different entity from its partners would deprive exemption of interest income from taxation on the principles of mutuality? c) Whether the Tribunal was justified in deviating from its own order on the principles of mutuality which was decided by it with regard to the appellant firm itself while deciding the issue of taxability of income in the hands of one of its partners, which decision has become final having been accepted by the Revenue? d) Whether the Tribunal was justified in holding that there was a valid firm in existence liable to be taxed in the status of firm when there was no business activity carried on by the firm while providing funds to its own partners and earning interest income therefrom?

(3.) LEARNED Counsel for the appellant contends, in the case of individual assessment of one of the partners, by name Meera Govind, such benefit was extended, therefore, the Tribunal was not justified in not extending such benefit so far as interest income of the firm is concerned. According to the learned Counsel, the firm did not do business of lending money to outsiders and it had done the business of money lending only to the partners of the firm. In support of his contention, he relies upon the case of Commissioner of Income Tax v. Nataraj Finance Corporation reported in (1988) 169 ITR 732 (AP).