9911796707
TMI Blog1980 (3) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... the HUF being styled as "Prakash Chandra Devendara Kumar Praakh". Shri Prakash Chand Parakh had also advanced some amount to the assessee firm out of his individual funds. The individual Sri Prakash Chand Parakh is an assessee in his own right and in his indiviaual capacity and is being assessed to income-tax regularly. For the same year 1972-73 the assessment in the case of the assessee was made under s. 143(3) on 27th April, 1974 but later on in an action under s. 154 of the Act, interest in the sum of Rs. 20,084 paid to Shri Prakash Chand Parackh, individual was disallowed and treated as income of assessee. The ITO reasoned that one of the partners of the assessee firm was Prakash Chand Parakh status of which was HUF and the said Shri P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in computation if the income of the assessee firm. The disallowance having been made under s. 40(b) of the Act. The facts in the case of Shri Surendra Kumar Maloo are similar with the facts as are mentioned in the case of Shri Prakash Chand Parakh. Shri Surendra Kumar Maloo was partner representing as Karta, his HUF styled as "Surendra Kumar Maloo Sons" while interest aid to him was on loan which was out of his individual funds and in his individual capacity. 4. The assessee being aggrieved preferred appeals, but the CIT(Appeals) vide orders dt. 15th Jan,79 which is a common consolidated order in respect of asst. yrs. 1971-72 and 1972-73, held that s. 40(b) provides for an absolute prohibition and section make no distinction between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on income accruing to them in their individual status, whereas the HUF were being assessed to income-tax in respect of income arising to the HUF's, though the HUF were represented in the assessee firm through their karta, the persons, whom interest has been paid not as karta representing the HUF but as individual and creditors on the funds which have been invested by the individuals out of their individual funds. He also contested the stand of the lower authorities as to taking of action under s. 154 of the Act for the asst. yr. 1972-73 on the ground that various High Courts have taken conflicting decisions on the subject matter and in the light of this fact he assailed the action of the lower authorities under s. 154 of the Act and for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though the said individual partners are partners in the assessee firm representing their HUFs and in the status of the karta of the HUF. For the asst yr. 1972-73 the said interest was allowed at the assessment stage but in an action under s. 154 of the Act, the said disallowance has been made on the ground that it was a mistake apparent from record and the mistake being that of interpretation of a legal provision viz. s. 40(b). 8. For the asst. yr. 1977-78 the disallowances have been made at the time of regular assessment made under s. 143(3) of the Act. The reasoning for making and sustaining disallowances for both the asst. yrs. Remained the same i.e. that the prohibition under s. 40(b) of the Act was absolute irrespective of the capac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credited to a separate account. The account as partner was styled as Terala Veeraiah(HUF) Account. For the asst. yrs. 1970-71 and 1971-72, interest received from the partnership viz. Rs. 7890 was credited to the individual account of Veeraiah and another sum of Rs. 8,585 to the account of Terla Veeraiah (HUF) Account. The claim of the assessee in respect of deduction of Rs. 7,890 was disallowed by the ITO under s. 40(b) of the IT Act on the ground that the said sum represents the interest paid to the partner. On appeal, the AAC and on further appeal. The Tribunal confirmed the order of the ITO on a reference. Held, that the Tribunal, having recorded the finding that there were two accounts, viz. Terla Veeraiah HUF and Terla Veeraiah 'Indivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of he assessee's case in appeal before us, s. 154 of the act has had no application in so far as asst. yr. 1972-73 is at issue. We stand fortified by the ration of the decision of the Supreme Court in the case of Volkart Brothers and others as stands reported in 82 ITR 50 and accordingly the orders of the lower authorities for the asst. yr. 1972-73 are quashed. The addition made and sustained by the authorities is directed to be deleted. 11. As regards asst. yr. 1977-78 suffice it to say that in the case of two conflicting decisions of two High Courts, an interpretation favourable to the assessee is called for and for their purpose, we do respectfully apply the ratio of the decision of the Hon'ble Supreme Court in the case of Vegetabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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