9911796707
TMI Blog1980 (2) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... rwalla in different capacity than the capacity in which he was a partner as a debatable point. (ii)... The CIT (A) has erred in confirming the order of the ITO when M/s Madhusudan Mahendra Kumar of which Sri Madhusudan Agarwalla was the Karta was a partner in the firm and Sri Madhusudan Agarwalla was not a partner in his individual capacity when interest was paid on his individual loan account. While making the assessments of the assessee firm the ITO disallowed interest paid to Sri Madhusudan Agarwalla-representing the HUF. But interest paid to Sri Madhusudan Agarwalla on his individual account was allowed. Subsequently, the ITO found that according to the provisions of s. 40(b) of the IT Act, 1961 interest paid to-Sri Madhusudan Agarwal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0(b) has no application and the orders of the Appl. Tribunal in so far as upholding the disallowance of interest under s. 40(b) is not correct. The Allahabad High Court in Madho Prasad, Pilibhit vs. CIT (2) had held that where the Karta of an HUF enters into a partnership with others, as far as his relation to the firm and his rights and obligations in regard to the other partners are concerned he is a partner only as an individual, though his joint family is entitled to get from him his share in the profits of the firm and the joint family is liable for his share of losses in the firm. The joint family, as such, does not become a partner nor will other members of the family become partners of that firm. There is a direct authority of the K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raindas (3) Karnataka High Court in CIT vs. Moolchand where the said high Court held that Tribunal was right in the view that there was no referable question of law as s. 154 could not be invoked where conceivably there could be more than one view and, according to one view, deduction of interest paid to the HUF of which the partner is the Karta, is allowable. In short, this is not a mistake which could be rectified under s. 154 of the Act. Various High Courts have taken divergent view regarding the rectification of mistake, under such circumstances. We, therefore, hold that the assessee is entitled to succeed. We accordingly allow the appeals filed by the Assessee.
6. In the result, the appeals are allowed. X X X X Extracts X X X X X X X X Extracts X X X X
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