Substantial question of law justified Supreme Court certificate where High Court views diverged on Section 40(b) interpretation.

A certificate for appeal to the Supreme Court was warranted where interpretation of a tax provision had produced conflicting High Court views and raised a substantial question of law of general importance. The controversy concerned the applicability of Section 40(b) to interest paid to a partner in a representative capacity. Because the divergence required authoritative settlement and the statutory condition for certification under Section 261 was met, the certificate was granted.

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Issues: Whether the case involved a substantial question of law of general importance warranting a certificate for appeal to the Supreme Court.

Analysis: The question referred earlier under Section 256(1) of the Income-tax Act, 1961 had generated conflicting views among High Courts on the applicability of Section 40(b) to interest paid to a partner in a representative capacity. In view of the divergence of judicial opinion and the importance of settling the controversy conclusively, the case was found fit for consideration by the Supreme Court.

Conclusion: The requirement for grant of a certificate under Section 261 of the Income-tax Act, 1961 was satisfied, and the certificate was granted.

Ratio Decidendi: Where a controversy on the interpretation of a provision has produced divergence of opinion among High Courts and involves a substantial question of law of general importance, a certificate for appeal to the Supreme Court is warranted.

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