1998 (1) TMI 31

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..... owing under section 40(b) the interest paid to the individual who is a partner representing the Hindu undivided family was not erroneous and prejudicial to the interest of the Revenue ? 2. Whether the Appellate Tribunal was correct in law in holding that the Explanations 2 and 3 to section 40(b) introduced by the Taxation Laws (Amendment) Act, 1984, which came into force on April 1, 1984, were clarificatory in nature ?" Though the assessee was not served in the tax cases, we have decided to proceed with the disposal of the tax cases as the questions of law referred to us seem to be governed by the decision of the Supreme Court in favour of the assessee. The assessee is a firm consisting of nine partners. Two of the partners, Sri Kishoril .....

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..... 0                     8.850 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 under the Hindu undivided family and not the individuals. The Income-tax Officer while completing the assessment for the assessment years 198182 and 1982-83 accepted the returns filed by the assessee, without disallowing the interest paid to the two individual partners. The Commissioner of Income-tax exercised the powers of revision conferred on him under section 263 of the Income-tax Act (hereinafter referred to as the Act). The Commissioner of Income-tax was of the .....

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..... brought to our notice the decision of the Supreme Court in Brij Mohan Das Laxman Das v. CIT [1997] 223 ITR 825, wherein the Supreme Court held the Explanation 2 to section 40(b) of the Income-tax Act, 1961, in the context of clause (b) of section 40, is declaratory in nature and would apply even for periods anterior to April 1, 1985. The above view of the Supreme Court was reiterated by the Supreme Court in the case of Suwalal Anandilal Jain v. CIT [1997] 224 ITR 753. He also brought to the notice of this court in the case of Rashik Lal and Co. v. CIT [1998] 229 ITR 458, wherein the Supreme Court doubted the earlier decisions in Brij Mohan Das Laxman Das v. CIT [1997] 223 ITR 825 and Suwalal Anandilal Jain v. CIT [1997] 224 ITR 753. We hav .....

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