Case Law Details
ACIT Vs Modesty Garments (ITAT Delhi)
ITAT Delhi held that as per partnership deep, partners shall be entitled to interest on their loan accounts with the firm at the prescribed rates, hence disallowance of the same is unjustified.
Facts- During the course of assessment proceedings, the AO made several disallowance. Accordingly, the assessee preferred appeal before the Ld. CIT(A) who deleted the disallowance of Rs.29,80,679/- being interest paid to the partners to the firm; deleted addition of Rs.3,46,50,000/- made by the Ld. AO under section 68 of the Act; restricted the disallowance to Rs. 74,785/- out of Misc. Expenses claimed at Rs. 2,46,358/-; sustained 10% disallowance out of tour and travel expenses claimed at Rs. 18,60,985/- allowing the rest of the claim under other heads of expenses.
The Revenue is aggrieved by the deletion of disallowance of interest of Rs. 29,80,679/- paid to the partners; deletion of addition of Rs. 3,46,50,000/- u/s. 68 of the Act and allowing by the Ld. CIT(A) long term capital loss of Rs. 9,770/- instead of short term capital gain computed by the Ld. AO in remand report.
Conclusion- Para 10 of the partnership deep mentions that the partners shall be entitled to interest on their loan accounts with the firm at such rates as are prescribed under the Act. In this view of the matter, we hold that the Ld. CIT(A) was perfectly justified in deleting the impugned disallowance.
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