Section 40(b) disallowance applies only to payments made to a partner personally, not to amounts attributable to an HUF.

Section 40(b) permits disallowance only of payments made to a partner in that capacity, not amounts attributable to a Hindu undivided family represented by the partner. Where a partner of the assessee-firm acted as karta of an HUF, payments to him or to the connected concern were not treated as payments to the partner personally. Following the earlier Full Bench view, the amounts were held outside section 40(b) and the issue was answered in favour of the assessee.

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Issues: Whether, where a partner of the assessee-firm acted as karta of a Hindu undivided family, payments made to him or to the concern connected with him could be disallowed under section 40(b) of the Income-tax Act, 1961 as payments to a partner.

Analysis: The governing principle applied was that section 40(b) permits disallowance only of amounts paid to the partner in that capacity. Where the partner represents a Hindu undivided family, payments attributable to the Hindu undivided family are not to be confused with payments made to the individual partner personally. On that basis, the earlier Full Bench view was followed and the payments in question were not treated as hit by section 40(b).

Conclusion: The question was answered in the negative and in favour of the assessee.

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