Partner financing may qualify as money-lending business; dual status does not bar creditor treatment.

A partner who advances money to a firm in which he is a partner is not, as a matter of law, excluded from being treated as a creditor or from carrying on money-lending business. Under the Partnership Act, such an advance may attract interest, and the dual status of partner and lender does not by itself negate the existence of a money-lending relationship. The contrary proposition that partner-financing can never form part of money-lending business was rejected, leaving the factual application to the Tribunal.

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Issues: Whether advances made by a partner to a firm in which he is a partner can constitute money-lending business.

Analysis: A partner may advance money to the firm and, under the Partnership Act, such an advance is recognised as one on which interest may be payable. The fact that the lender is also a partner does not, by itself, prevent him from occupying the position of a creditor or from carrying on the business of money-lending. The contrary view that such financing can never form part of money-lending business was rejected.

Conclusion: The question was answered in the affirmative in favour of the assessee and against the department.

Final Conclusion: The reference was disposed of by holding that partner-financing of a firm is not excluded as a matter of law from money-lending business, leaving the factual application to the Tribunal.

Ratio Decidendi: A partner who advances money to a firm of which he is a partner is not, as a matter of law, barred from being treated as a creditor or from carrying on money-lending business.

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