Section 80L deduction denied on interest income from firm-held deposits after retrospective amendment.

Interest income derived from deposits standing in the name of a firm is not eligible for deduction under section 80L in the hands of a partner, because section 80L(3), inserted retrospectively from 1 April 1976, provides that where the relevant income is derived from an asset held by, or on behalf of, a firm, no deduction is allowable in computing a partner's total income. The retrospective amendment resolved the controversy by treating such firm-held income as outside the partner-level deduction claim, and the issue was answered in favour of the Revenue and against the assessee.

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Issues: Whether a partner is entitled to deduction under section 80L of the Income-tax Act, 1961, in respect of interest earned by deposits standing in the name of the firm.

Analysis: The controversy was concluded by the insertion of sub-section (3) in section 80L by the Taxation Laws (Amendment) Act, 1984, made retrospective from 1 April 1976. The amended provision declares that where the relevant income is derived from any asset held by, or on behalf of, a firm, no deduction is allowable in computing the total income of any partner in respect of such income.

Conclusion: The partner was not entitled to deduction under section 80L on the interest income of the firm, and the question was answered in favour of the Revenue and against the assessee.

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