9911796707
TMI Blog1998 (1) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 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 Kishorilal Arora a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. He, therefore, issued a show-cause notice to the assessee and after hearing the objections of the assessee, held that the provisions of section 40(b) of the Act would apply and the amendment made to section 40(b) of the Act by the Taxation Laws (Amendment) Act, 1984, with effect from April 1, 1985, has no application to two assessment years, namely, 1981-82 and 1982-83 and, therefore, he directed the Income-tax Officer to apply the provisions of section 40(b) of the Act and to complete the assessment. The assessee appealed to the Tribunal against the orders passed by the Commissioner of Income-tax and contended that the provisions of Explanation to section 40(b) of the Act were clarificatory in nature and applied to the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation 2 to section 40(b) of the Act is declaratory in nature and it will apply even for the period prior to the period April 1, 1985. The above decision was followed in Suwalal Anandilal Jain's case [1997] 224 ITR 753. The Supreme Court therein held that where a person is a partner in the firm as a karta representing the Hindu undivided family, interest paid to him by the firm on deposits made by him with the firm in his individual capacity, is deductible, while computing the income of the firm chargeable under the head "Profits and gains of business or profession" even for periods prior to April 1, 1985. Though the above decision was doubted by the Supreme Court in Rashik Lal and Co. v. CIT [1998] 229 ITR 458, we are of the view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
