Rajesh Balia, J. - (1.) HEARD learned counsel for the petitioner.
(2.) THIS is an application under Section 256(2} of the Income-tax Act, 1961, by the Commissioner of Income-tax, Jaipur, requiring this court to direct the Income-tax Appellate Tribunal to state the case and refer the following question said to be a question of law arising out of the Tribunal's order dated January 29, 1979 : "Whether, on the facts and in the circumstances of the present case, the Tribunal was justified in holding that interest paid by the assesses to the minors on the gift made by the partner by mere book entries is to be allowed under Section 37(1) of the Income-tax Act, 1961 ?" The Tribunal has rejected the application under Section 256(1) on the ground that no question of law arises out of its order. The respondent-firm for the assessment year 1976-77 has claimed deduction in respect of interest paid to the minors on sums which were shown as deposits in the books of account. The amount standing credited to the name of minors were as a result of gifts made by the partners of the firm. The gifts have been made by the partners of the firm in favour of the respective minors by transferring amounts from their respective accounts with the firm to the minors' accounts by book entries. The Assessing Officer as well as the Appellate Assistant Commissioner have held the said gifts to be not-genuine which are alleged to have been carried out by mere making of book entries and consequently, held that interest was in fact paid to the partners and not to the donees. As the interest paid to the partners was not allowable under the provisions of the Income-tax Act, the same was disallowed as deduction while computing the income of the firm. In the first instance, the Income-tax Tribunal has set aside the order passed by the lower authorities and directed the Appellate Assistant Commissioner to decide the question afresh about the allowability of the interest under Sections 36(1) and 37(1). The gifts were held to be genuine by the Tribunal. The Appellate Assistant Commissioner again held the gifts not to be genuine and held that the entries were managed by the donors to their own advantage.
(3.) THE Tribunal held that the Appellate Assistant Commissioner was not justified in holding the gifts to be not genuine, particularly when the Gift-tax Officer has held the gifts to be genuine and gift-tax has also been paid on the said gifts. With this finding it was held that since the amounts in the names of the minors were actually utilised by the firm for its own purpose, the interest was paid for the purpose of carrying on the business and was then an allowable expense. In our opinion, all the aforesaid findings are findings of fact and do not give rise to any question of law. The Tribunal was justified in not entertaining the application under Section 256(1) of the Act. This application under Section 256(2) is, therefore, rejected. There shall be no order as to costs. ;