COMMISSIONER OF INCOME TAX Vs. NAGARIA OIL MILLS

JUDGEMENT

(1.) THIS is a reference by the Tribunal at the instance of the CIT at Hyderabad on the following question of law : - -

(2.) THE facts as stated in the reference are that the assessee is a resident but unregistered firm doing business at Warangal. On assessing it for the year 1358F, the ITO noted that the assessee had credited four non -residents with interest of Rs. 21,968 -15 -9 on monies borrowed from them. He, therefore, passed the following order purporting to act under s. 24(12) of the Hyderabad IT Act :

(3.) IT also appears from the statement of the case that while assessing the firm, the ITO allowed the interest paid to the non -residents as a revenue deduction under s. 12(2)(iii) of the Hyderabad IT Act. The assessee firm appealed to the AAC objecting to the demand of a tax amounting to Rs. 3,530 -9 -0 on the ground that it had not in fact paid any interest to the non - residents, but only credited it to their accounts. The AAC dismissed the appeal observing.