1986 (12) TMI 23

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..... 3,882 and Rs. 5,914, respectively, made by the Income-tax Officer on this account ? " The assessee is a registered firm consisting of several partners. Hari Nath, one of the partners, in his individual capacity received interest on the amounts invested by him in the firm in his individual capacity. The Income-tax Officer added back these amounts to the total income of the assessee-firm. The assessee-firm appealed to the Appellate Assistant Commissioner. It was contended in the appeal that an individual and the Hindu undivided family are two different entities and are assessed separately. Consequently, the interest paid to Hari Nath on the loans advanced to the assessee-firm could not be added to the income of the firm. The Appellate Assis .....

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..... behalf of the family or for his own benefit and interest, is immaterial. Payment to a person who is a partner is the only criterion for the purpose of section 40(b) of the Income-tax Act, 1961, which prohibits in absolute terms any allowance in respect of any payment by way of interest, salary, bonus, commission or remuneration made by the firm to any of its partners and does not make any distinction in respect of the character or capacity in which the payment is made to the partner. If a partner makes deposits in the firm of monies belonging to his Hindu undivided family and also monies belonging to him individually, in fact and in law the partner brings in the money. In both cases, the payment of interest by the firm to such a partner is .....

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..... have noted above the view of this court in the year 1979. Since then, that decision holds the field. This decision is binding on us as the law of precedents is that a decision of the Division Bench given in an earlier case is binding on a subsequent Bench. We are not inclined to accept the suggestion of the assessee's counsel that the controversy involved in this case be referred for decision by larger Bench. In Punjab University v. Vijay Singh Lamba, AIR 1976 SC 1441, what was said about precedents is instructive and can, therefore, be quoted with advantage in this judgment. The Bench held (at page 1446): " Precedents, as observed by Lord Macmillan, should be 'stepping stones and not halting places.' Birch v. Brown [1931] AC 605 (63 .....

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