Netting of partner interest under Section 40(b) limits disallowance to net interest where mutual payments occur.

Where a firm both pays and receives interest from the same partner, the amount disallowable under section 40(b) is limited to the net interest payable by the firm (the excess of interest paid by the firm over interest received). Instruction No.882 dated 25-9-1975 is superseded; the netting rule applies to all pending assessments while completed assessments need not be disturbed.

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