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Interpretation of section 80L of the Income-tax Act for deduction in respect of interest income from a partnership firm. Analysis: The High Court of Allahabad was presented with a question regarding the allowance of deduction under section 80L of the Income-tax Act for the share income of a partner in a registered firm as allocated under section 67(2) of the Act. The Appellate Tribunal referred this question for the court's opinion. The facts revealed that the assessee, an individual partner in a firm, claimed deduction under section 80L for his share of interest income from the firm, which was not initially considered by the assessing authority. The Appellate Assistant Commissioner directed the allowance of the deduction based on the provisions of section 67(2) of the Act, which was upheld by the Income-tax Appellate Tribunal, leading to the reference to the High Court. The court examined the relevant sections of the Act, specifically section 67(2) and section 80L(1), to determine the eligibility of the individual partner for the claimed deduction. Section 67(2) mandates the apportionment of a partner's share of income or loss of the firm under different heads of income as determined for the firm. On the other hand, section 80L(1) allows for a deduction in the total income of an individual assessee for interest income falling under specified categories. The court emphasized that an individual is entitled to deduction for interest income accruing under specific clauses. Referring to the decision in CIT v. Brij Raman Das, the court reiterated that income accruing to a partnership firm retains its character even after allocation to individual partners. The character of income remains unchanged before and after allocation, as clarified by previous judicial precedents. The court noted the conflicting view of the Orissa High Court in CIT v. Janardan Subudhi but aligned with the interpretations of the Allahabad and Bombay High Courts in similar cases. Ultimately, the High Court upheld the decisions in Brij Raman Das and Gopalkrishna M. Singre, affirming that the character of income remains consistent before and after allocation to individual partners. Therefore, the court answered the referred question in favor of the assessee and against the Revenue, allowing the deduction under section 80L for the partner's share income from the firm.
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