INCOME TAX OFFICER Vs. PAUL ENTERPRISE

JUDGEMENT

(1.) This appeal filed by the revenue is against order of the CIT (A) dated 3-8-1987 for the assessment yea 1984-85 for which the previous year ended on 31-3-1984.

(2.) In the assessment made under section 143(3), the ITO added Rs. 10,903 towards the accrued interest on fixed deposits of Rs. 1,20,000 standing in the names of the partners on behalf of the firm by observing as under :

(3.) Before the CIT (A), the assessees counsel stated that the capital mounting to Rs. 42,472 in the assessment year 1981-82, Rs. 1,31,546 in the assessment year 1982-83, Rs. 1,86,470 in the assessment year 1983-84 and Rs. 2,27,561 in the assessment year 1984-85 while the fixed deposits in the corresponding period were Rs. 30,000 in the assessment year 1981-82, and Rs. 1,20,000 each in the assessment years 1982-83, 1983-84 and 1984-85. The said fixed deposits were in the names of the partners and the interest receivable shown in the names of individual partners. The total deposits were divided amongst four partners having Rs. 30,000 each. Thus, the fixed deposits were not the investments made by the firm. The said deposits were shown in the Balance Sheet to empress the customers and the bank authorities with whom the assessee had to deal with. As the above interest was earned by the partners, the same should not be added again in the from of deemed interest in the income of the assessee firm. The CIT (A) deleted the addition of Rs. 10,093 by observing as under :