Law:

Section:

Section 36(1)(iii) of the Income-tax Act, 1961 [Corresponding to section 10(2)(iii) of the Indian Income-tax Act, 1922] - Interest on borrowed capital - Assessment year 1954-55 - Whether member of an association, who advanced money to it was in position of a creditor of association and interest paid to him was a legitimate business expense allowable under section 10(2)(iii) - Held, yes Section 154 of Income-tax Act, 1961 [Corresponding to section 35 of the Indian Income-tax Act, 1922], read with rule 24 of Appellate Tribunal Rules 1946 - Rectification of mistakes - Apparent from records - Assessment year 1954-55 - An appeal filed by assessee was dismissed by Tribunal for default of assessee not being present - On an application of restoration filed by assessee, Tribunal held that there was sufficient cause which prevented assessee from attending hearing before Bench of Tribunal and as such order of dismissal was rectified - Whether rectification of order of dismissal of appeal was not within ambit of powers exercisable under section 35 of 1922 Act - Held, yes - Whether, however since Tribunal was not competent to pass order of dismissal for default as such order so passed could be rectified under section 35 of 1922 Act - Held, yes FACTS The ITO, assessed the assessee in the status of a registered firm and disallowed the interest paid to one of its partners. The status of the assessee as a registered firm had been questioned before the Tribunal in another appeal arising out of the assessment made for an earlier year. The Tribunal held that there was no genuine firm in existence. Since there was no change in the subsequent years in that position, the Commissioner, revised under section 33B(1) of the 1922 Act the order of assessment, and directed the ITO to reassess the assessee in the status of an association of persons and also to disallow the interest paid to the partner. Being aggrieved the assessee preferred an appeal to the Tribunal. After allowing various adjournments of hearing requests made by the assessee the Tribunal dismissed the appeal for default of assessee not present. Thereafter, the assessee filed a miscellaneous application for restoring and…

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