RAM MAHADEO PRASAD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This is a reference under Section 66 (1), Income-tax Act, made at the instance of the assessee. The assessee is a registered firm which carries on business, owns house property, has income from dividends and other sources. During the relevant assessment year, the assessee claimed certain deductions as hotel charges incurred by the partners while on tour connected with business. The partners of the assessee firm had also lent money to the firm for purposes of carrying on its business and had from time to time borrowed money from it. There was a Khata in the name of each partner which showed the amount of interest paid by the firm to the partner on the amount borrowed from him and also interest received from the partner on any amount borrowed by him. The total amount paid to the partners as interest OD amounts borrowed from them was Rs. 19,712/-, while the amount received from the partners as interest on monies borrowed by them was Rs. 7,931/-. The assessee had in his return deducted from its income the sum of Rs. 19,712/- paid as interest to the partners. The Income-tax Officer disallowed the hotel charges paid by the partners, as also the whole item of Rs. 19,712/-which he added back to the income. The Appellate Assistant Commissioner and the appellate Tribunal directed a sum of Rs. 13,412/- only to be added back to the return.

(2.) On the application of the assessee, the following two questions have been referred to us for our decision:

(3.) As regards the first question it is already covered by our decision in -- 'Ramkishan Sunderlal v. Commr. of Income-tax, U P.', (1951) 19 ITR 324 at p. 330 (All) (A). We see no reason to reconsider our view and answer the question in the negative.