Interest paid to Hindu undivided families cannot be disallowed merely because the partners are members of those families.

Interest paid by a firm to Hindu undivided families was not disallowable merely because the partners were individuals who belonged to those recipient HUFs. The court treated the HUFs as distinct entities from the partners and followed the existing judicial view that the payment was made to the HUFs in their own right. The Tribunal's deletion of the addition was therefore upheld, and the issue was decided in favour of the assessee and against the Revenue.

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Issues: Whether the Tribunal was justified in deleting the addition of interest paid by the assessee-firm to Hindu undivided families where the partners were individuals but the recipients were the HUFs.

Analysis: The interest was held to have been paid not to the partners in their individual capacity but to the Hindu undivided families, which are distinct entities from the partners. The question stood covered by the existing judicial view that such interest cannot be disallowed merely because the partners were members of the recipient HUFs.

Conclusion: The Tribunal's deletion of the addition was upheld, and the reference was answered in favour of the assessee and against the Revenue.

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