Deductibility of interest to association members turns on creditor status and absence of statutory bar under the relevant tax year.

Interest paid by an association of persons to members who advanced funds for its business was treated as a deductible business expenditure under the governing law, on the basis that the member acted as a creditor and the payment formed part of business profit computation. No statutory prohibition was shown for the relevant assessment year, and the restriction in section 40(ba) applied only from 1 April 1989. On that footing, no referable question of law arose from the Tribunal's order, and the reference application was not maintainable.

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Issues: Whether any referable question of law arose from the Tribunal's order on the allowability of interest paid by an association of persons to its members as a business deduction, and on the alleged absence of prohibition under the Income-tax Act.

Analysis: The interest paid to members who had advanced money to the association for its business was treated as a legitimate deduction by authority of the earlier High Court decision, which recognised the member as a creditor and the interest as deductible in computing business profits. No provision was shown to prohibit such deduction during the relevant assessment year, and the prohibition introduced by clause (ba) in section 40 of the Act operated only from 1 April 1989.

Conclusion: No referable question of law arose and the reference application was not maintainable.

Ratio Decidendi: Where interest paid by an association of persons to members who advanced funds for its business was allowable under the governing law and no statutory prohibition then existed, no referable question of law arose for reference.

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