COMMISSIONER OF INCOME TAX Vs. S RAMANATHAN

JUDGEMENT

(1.) UNDER s. 256(1) of the IT Act, 1961, at the instance of the Revenue, the Tribunal had referred the following question for our opinion : "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in deleting the hundi loans of Rs. 1, 15, 000 and the interest thereon of Rs. 15, 000 which was disallowed by the ITO under s. 69D of the IT Act, 1961 ?"*

(2.) THE assessee, S. Ramanathan, had taken loans of Rs. 50, 000 and Rs. 65, 000, respectively, on 31st July, 1977, and 1st Aug., 1979, from the Mercantile Credit Corpn. THE ITO treated these loans as hundi loans. Since the borrowings were effected in cash, the ITO applied s. 69D of the IT Act, 1961, and added the amounts in question to the income of the assessee for the asst. yr. 1980-81. THE ITO also disallowed the interest amount of Rs. 15, 000 involved in the same transactions since the payments in respect of the loans were paid in cash. On appeal, the CIT(A) held that s. 69D of the IT Act would not be applicable to the facts of the case. Accordingly, he deleted the addition in question made by the ITO.