*****Drawings made for Non-Business purposes are not allowable as Income Tax Deduction: ITAT

Clipped from: https://www.taxscan.in/drawings-made-for-non-business-purposes-are-not-allowable-as-income-tax-deduction-itat/175739/?utm_source=izooto&utm_medium=push_notifications&utm_campaign=Deduction


By Taxscan Team – On May 18, 2022 12:50 pm

Drawings - non-business - Deduction - ITAT - Taxscan

The Visakhapatnam bench of the Income Tax Appellate Tribunal (ITAT) has held that drawings made for non-business purposes are not allowable as a deduction under section 36(1)(iii) of the Income Tax Act, 1961

The appellant appealed against the orders of the Commissioner of Income Tax (Appeals) dated 06.12.2019 for the Assessment Year (A.Y.) 2011-12 and 2012-13. The appellant assessee is a partnership firm, and has a return of taxable income of Rs.65,758/-. The Assessing Officer (AO) completed the reassessment u/s 143(3) and confirmed the addition by holding that the amounts borrowed from the assessee firm are interest-bearing funds in the form of capital from the partnersin the form of secured loans.  As per provision 36(1)(iii) of the Income Tax Act, 1961, if any amounts are used for non-business purposes by the assessee, the same is to be disallowed. CIT(A) held that the partners have made drawings from the assessee firm and used them for non-business purposes, the provisions of section 36(1)(iii) are applicable. 

The Tribunal observed that some of the partners have borrowedsome interest-free loans from the firm for non-business purposes and the AO rightly disallowed by applying the provisions of 36(1)(iii) of the Act.

The Coram consists of Shri DuvvuruRL Reddy, Judicial Member and Shri S Balakrishnan, Accountant Memberdidn’t find any infirmity in the orders passed by the AO as well as the CIT(A) and dismissed the appeal.Shri S.P.G.Mudaliar appeared on behalf of the respondent.To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s