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TMI Blog1983 (6) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... he sum, improve it and hold it on behalf of his sons who were living or who may be born thereafter and that lie should divide the amounts among his sons after the last son attained the age of eighteen. After the death of Seeniappa Nadar, the amounts standing to the credit of the deceased were transferred to the account of the estate of the deceased. For the amounts standing to the credit of the estate of the deceased, interest has been credited to the estate of the deceased. Kalidasan, the trustee appointed under the will of Seeniappa, was not a partner in the firm, but his two minor sons, Karunakaran and Karthikeyan, have been admitted to the benefits of the partnership firm. On these facts, the ITO held that the interest of Rs. 12,838 cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tood to the credit of Seeniappa Nadar at the time of his death to Kalidasan, the trustee appointed under the will. Admittedly, no payment has been made directly to the minor partners who were admitted to the benefits of the partnership. On these admitted facts, the question is whether the sum of Rs. 12,838 can be said to have been paid as interest to the minor partners so as to attract s. 40(b). Section 40(b) of the I.T. Act, 1961, is to the following effect : " s. 40. Amounts not deductible :-Notwithstanding anything to the contrary in sections 30 to 39, the following amounts shall not be deducted in computing the income chargeable under the head 'Profits and gains of business or profession ' ....... (b) in the case of any firm, any paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed under the will who is to administer, the trust till the last son attained majority, cannot be taken to be a payment to the minor partners. In this case, the Tribunal has taken the view that though there is payment of interest, the payment is not to the partners so as to attract s. 40(b). According to the Tribunal, in order to be a payment, there should be first of all an accrual of right to the payment and, on the facts of this case, there is no accrual of interest to the partners as such having regard to the terms of the will. As per the terms of the will, the minor partners will get their share of the estate including the interest credited only after the youngest son attained the age of 18, and until that date, no right has accru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appa Nadar after they attained majority, and till the date of majority, no right accrues to them in the interest paid. This court in a recent decision in Venkatesh Emporium v. CIT [1982] 137 ITR 593, has dealt with a case of payment of interest to the family of the partner, since the partner represented his family in the partnership. This court took the view that even though the joint family was represented by a member of the family, so long as the member is shown to be a partner in his individual capacity, the payment of interest made to the family will not attract s. 40(b). Therefore, the disallowance of interest paid by the firm to the family invoking s. 40(b) of the Act was held not justified. As the payment of interest has been made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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