Muthoot Bankers vs ITO and Another

C.N. Ramachandran Nair, J.—The question raised in the appeal, filed by the assessee against Annexure E order of the Tribunal, is whether the assessee was entitled for deduction of Rs. 10,60,000 paid to a partner, who was a minor.

We heard Shri P. Balachandran, learned senior counsel appearing for appellant and learned standing counsel for respondents.

The assessee, who was engaged in money lending business, was following cash system of accounting. Interest was credited on receipt basis and similarly payment of interest was also claimed and allowed on cash basis. The transactions claimed and disallowed is payment of interest of Rs. 10,60,000 stated to be made in cash in three lots of Rs. 2,60,000, Rs. 4,00,000 and another Rs. 4,00,000 paid on the last but one previous date i.e. on 30-3-1991. The assessee explained the transactions as payment made and redeposit of the same amount by the minor, represented by her guardian and the managing partner. The Tribunal found that the real transaction has not taken place because assessee did not have the cash balance to make payment. From the argument of the assessee itself, it is clear that this is only accounting manipulation and not real cash payment. The Tribunal, therefore, found that it was not a genuine transaction at all. We do not find any substantial question of law arising from the order of the Tribunal rendered after verifying the cash book and after satisfying that there were no funds to make payment of amount claimed. We, therefore, dismiss the appeal.