9911796707
TMI Blog1998 (4) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961 ? 2. Whether the Tribunal was right in holding that the decisions of the Madras High Court in Venkatesh Emporium vs Commissioner of Income-tax [1982] 137 ITR 593 and T. M. N. M. Somasundara Nadar Sons vs Commissioner of Income-tax [1982] 137 ITR 815, relied on by the assessee were not applicable to the assessee's case ? 3. Whether the Appellate Tribunal had any material to come to the conclusion that the Hindu undivided family (minors) were not creditors of the assessee ? 4. Whether the Appellate Tribunal was right in its inference that the details furnished in the statement of accounts of the assessee-firm did not reveal that the Hindu undivided family (minors) were the creditors inasmuch as the interest to such entries we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest paid to the smaller Hindu undivided family in the other firm. The assessee carried the matter in appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) found that the smaller Hindu undivided families were different entities and the disallowance made by the Income-tax Officer under section 40(b) of the Act was not justified and directed the Income-tax Officer to allow interest paid to the smaller Hindu undivided families which was no doubt represented by the same karta of the bigger Hindu undivided family in the firm, but, in a different capacity. The Revenue preferred an appeal challenging the order of the Commissioner of Income-tax (Appeals). The Tribunal found from the deeds of partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmissions. In our opinion the questions have to be considered in the light of the provisions of section 40(b) of the Act and the Explanation introduced in the said section. Section 40(b) of the Act provides that in the case of any firm any payment of salary, interest bonus commission or remuneration made by the firm to any partner of the firm shall be disallowed in computing the income chargeable under the head "Profits and gains of business or profession." An Explanation was introduced to section 40(b) of the Act by the Taxation Laws (Amendment) Act 1984. The Supreme Court in the case of Brij Mohan Das Laxman Das vs Commissioner of Income-tax [1997] 223 ITR 825, held that Explanation 2 to section 40(b) of the Act, with which we are concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partner the provisions of section 40(b) of the Act cannot be invoked. It may be true that some of the members are common in both the families but under the income-tax law both the joint families are different taxable entities and because some of the members are common in both the families that would not make both families one unit and it cannot also presume that the karta was representing the smaller Hindu undivided family as a partner. His capacity is different. In our view the provision of section 40(b) of the Income-tax Act does not apply to the facts of the case. We are of the opinion that in view of the clear language employed in Explanation 2 to section 40(b) of the Act and in view of the finding that only the bigger Hindu undivided ..... X X X X Extracts X X X X X X X X Extracts X X X X
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