9911796707
TMI Blog1987 (6) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... no interest was payable thereon. The two partners in their individual capacity had credit balances in the accounts of the firm on which interest was paid in the following sums : . 1981-82 1982-83 Sri Kishoilai Arora Rs. 35,975 Rs. 57,729 Sri Chandrakumar Arora Rs. 7,500 Rs. 8,880 Section 40(b) of the Income-tax Act, 1961 provides that in the case of a firm, any payment of interest to any partner of the firm shall not be deducted in computing the income. The assessee-firm did not deduct the interest paid to the two partners in their individual capacity on the ground that the real partners were only the joint families and not the individuals. The income returned without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch of the Tribunal has also applied those cases in Rm. Appavu Chettiar [IT Appeal Nos. 1672 and 1806 (Mad.) of 1985] to the assessment years prior to the introduction of the amendment. 5. On a consideration of the rival submissions, we are of the opinion that the assessee is entitled to succeed. No doubt, it is well established that only an individual can be a partner of a firm and whatever his representative capacity, as between the partners concerned, the individual alone is a partner and not the joint family or trust which he may represent. With this principle, if we look at the wording of section 40(b), it would appear that while it calls for disallowance of interest paid to a partner it would mean the disallowance of any interest pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another person of the firm shall not be credited as interest paid to the partner for the purposes of section 40(b). That is the specific case of the present assessee and clearly the Explanation is attracted with the effect that such interest paid to the individual where he represents the joint family in the firm is not to be disallowed under section 40(b). The decision of the Andhra Pradesh High Court is the only decision of an High Court on the question whether the Explanation to section 40(b) is clarificatory and applies even for the assessment years prior to the date of the amendment. We are, therefore, required to follow that decision and hold that in the present case in view of the clarificatory nature of the amendment as held by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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