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Sri Ram Mahadeo Prasad Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 435 of 1976
Judge
Reported in[1979]120ITR149(All)
ActsIncome Tax Act, 1961 - Sections 30 to 39 and 40
AppellantSri Ram Mahadeo Prasad
RespondentCommissioner of Income-tax
Appellant AdvocateA.N. Mahajan, Adv.
Respondent AdvocateAshok Gupta and ;R.K. Gulati, Advs.
Excerpt:
- - ' 3. this provision clearly excludes deductions of interest paid to partners, and if any authority was required that is to be found in the assessee's own case in sri ram mahadeo prasad v......in computing the income chargeable under the head 'profits and gains of business or profession'... (b) in the case of any firm, any payment of interest, salary, bonus, commission or remuneration made by the firm to any partner of the firm.' 3. this provision clearly excludes deductions of interest paid to partners, and if any authority was required that is to be found in the assessee's own case in sri ram mahadeo prasad v. cit : [1953]24itr176(all) . 4. we, accordingly, answer the question in the affirmative, in favour of the department and against the assessee. there shall be no order as to costs .
Judgment:

C.S.P. Singh, J.

1. The Tribunal has referred the following question for the opinion of this court:

' Whether, on the facts and in the circumstances of the case, on proper interpretation of Section 40(b) of the Income-tax Act, 1961, the interest received from the partners of the firm could not be deducted from the interest paid to the partners by the firm for the purposes of Section 40(b) for the assessment year 1971-72 '

2. The facts necessary for answering the question are short. The assessee is a partnership firm, and carried on business of flour mill and had a tin factory at Kanpur. During the previous assessment year relevant for 1971-72, it had advanced certain sums of money to its partners and it also had taken loans from them. It had paid interest on the amount borrowed, and received interest on the amounts advanced. The assessee's contention was that the interest paid to the partners should be deducted from its total income, and in the alternative contended that only that amount that remained after deducting the interest paid from the interest received from the partners, could be added to its income. This contention was rejected by the ITO in view of Section 40(b) of the Act. Both the AAC and the Tribunal have held likewise. The deductions claimed by the assessee could not be sustained in view of Section 40(b) of the Act, which is in the following words :

' 40. Notwithstanding anything to the contrary in Sections 30 to 39, the following amounts shall not be deducted in computing the income chargeable under the head 'Profits and gains of business or profession'... (b) in the case of any firm, any payment of interest, salary, bonus, commission or remuneration made by the firm to any partner of the firm.'

3. This provision clearly excludes deductions of interest paid to partners, and if any authority was required that is to be found in the assessee's own case in Sri Ram Mahadeo Prasad v. CIT : [1953]24ITR176(All) .

4. We, accordingly, answer the question in the affirmative, in favour of the department and against the assessee. There shall be no order as to costs .


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