COMMISSIONER OF INCOME TAX Vs. MOTI LAL RAMJIWAN AND COMPANY

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue, to answer the following question of law, namely :

(2.) THE relevant assessment year is 1979-80. THE partners in the assessee-firm were representing their Hindu undivided families in the capacity of karta. THE Hindu undivided families had advanced loans to the firm and the interest on those loans were paid by the firm for the benefit of the Hindu undivided families. THE question was whether the amount of interest so paid by the firm could be deducted while computing the income in view of Section 40(b) of the Act. THE Income-tax Officer disallowed the deduction taking the view that the prohibition contained in Section 40(b) of the Act is attracted. THE Appellate Assistant Commissioner reversed that view and the Tribunal has concurred with the view of the Appellate Assistant Commissioner. Hence, this reference at the instance of the Revenue.