The Tax Publishers2020 TaxPub(DT) 1016 (Kol-Trib) : (2020) 181 ITD 0001

INCOME TAX ACT, 1961

Section 143

Debit balance in one of the partner's current account was appearing for last several years and case of assessee-firm had been under scrutiny and in none of the earlier years any hypothetical income had been subjected to tax in the hands of assessee and, therefore, following the principle of consistency, there being no change in the facts and circumstances during the year under consideration, there was no justification of AO in imputing interest income on debit balance of said partner and subjecting the same to tax in the hands of assessee.

Assessment - Addition to income - Notional interest on partner's debit balance -

AO made addition in the hands of assessee-firm on account of notional interest to be charged from partner in respect of balance standing to debit of partner's current account. Held: As per Partnership Act, 1952, partners can carry on any business jointly and can also act upon in the manner as they deem fit in inter se relationship between them. In assessee's case as per clause 10 of partnership deed, no interest was to be charged or paid to partners in respect of balances standing to debit or credit of their capital account. Also, debit balance in one of the partner's current account was appearing for last several years and case of assessee had been under scrutiny and in none of the earlier years any hypothetical income had been subjected to tax in the hands of assessee and, therefore, following the principle of consistency, there being no change in the facts and circumstances during the year under consideration, there was no justification of AO in imputing interest income on debit balance of said partner and subjecting the same to tax in the hands of assessee.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12 & 2012-13

INCOME TAX ACT, 1961

Section 37(1)

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