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1977 (11) TMI 3 - HC - Income Tax

Issues:
Interpretation of partition deed for Hindu Undivided Family (HUF) regarding allocation of funds for wife and minor daughters and their utilization in the family business.
Allowability of interest paid by the assessee on the allocated funds as a deduction under sections 36(iii) and 37(i) of the Income-tax Act, 1961.

Analysis:
The judgment pertains to the assessment of a HUF for the years 1968-69 and 1969-70, focusing on the interpretation of a partition deed executed on January 21, 1967. The partition deed allocated funds for the wife and minor daughters of the karta, specifying amounts for maintenance, education, and marriage expenses. The deed was clear in its provisions, allotting Rs. 15,000 to the wife and Rs. 7,500 to each minor daughter. The assets were divided accordingly, with the father continuing the family business post-partition. The Tribunal recognized the allocations as provisions for maintenance, which were utilized in the business by the karta. The court concluded that the amounts allocated to the wife and minor daughters were rightfully used in the business, with interest paid on these amounts considered as a debtor-creditor relationship. Consequently, the interest paid was deemed an allowable deduction under section 36(1)(iii) of the Income-tax Act, 1961.

In light of the above analysis, the court answered the referred question in favor of the assessee, emphasizing that the interest paid on the allocated funds for the wife and minor daughters was a legitimate deduction. The Department was directed to bear the costs, including the advocate's fee.

 

 

 

 

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