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TMI Blog1976 (5) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... Hindu undivided family. However the assessee claimed before the Income-tax officer allowance in respect of interest paid to Shri. C. S. Ayyaswamy Iyer, Hindu undivided family. The Income-tax Officer disallowed the same on the ground that interest paid to a partner cannot be allowed in view of s. 40(b) of the Income-tax Act, 1961. 3. On appeal before the Appellate Assistant Commissioner it was argued on behalf of the assessee that the interest of Rs. 6,175 paid to the account of Shri. A. Venkateswaran, Hindu undivided family and the interest of Rs. 19,769 paid to the account of Shri. Ayyaswamy Iyer, Hindu undivided family are not liable to be disallowed under s. 40(b) of the Income-tax Act, 1961. The Appellate Assistant Commissioner observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the Appellate Assistant Commissioner. Shri. Venkateswaran, who appeared in person pointed out that the interest of Rs. 6,175.38 was credited to the Hindu undivided family loan account of Shri. Venkateswaran Ledger No. 23 at page 619. He submitted that the partners of the assessee firm Shri. Venkateswaran and Shri Ayyaswamy Iyer had impressed the amount standing to their credits as on 31st March, 1970 with the character of the joint family property. So far as Shri. Venkateswaran, is concerned the aforesaid asset on 31st March, 1970 was impressed with the character of a joint Hindu undivided family consisting of himself, his minor son and two daughters and that by means of book entries there was a partition of that asset on the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s wife and two major sons. The Appellate Tribunal in the said order had found that the interest credited to the accounts of the minor son and minor daughters of Venkateswaran who were the divided members of the family, could not be treated as interest payment made by the firm to its partner Shri Venkateswaran. Likewise the Appellate Tribunal held that the interest credited to the account of Shri Ayyaswamy Iyer was only with reference to the assets impressed with the character of Hindu undivided family and therefore, the interest payments are not hit by s. 40(b)of the Income-tax Act. in this view of the matter a similar departmental appeal filed for the earlier year was dismissed by the Appellate Tribunal. For the same reasons we hold that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding authorities as it would be sufficient if a small passage from a decision of the Supreme Court in the case of Bhagwan Dayal vs. Rooti Devi, AIR 1962 SC 287 is quoted. In paragraph 47 of the Judgment, it has been said: "In Heyne s Hindu Law, 11th edition, the legal position has been neatly stated thus at page 347: So long as a family remains an undivided family, two or more members of it, whether they be members of different branches or of one and the same branch of the family, can have no legal existence as a separate independent unit, but all the members of a branch, or a sub-branch, can form a distinct and separate corporate unit within the larger corporate family and hold property as such. Such property will be joint family prop ..... X X X X Extracts X X X X X X X X Extracts X X X X
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