1984 (9) TMI 161

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....CIT dt. 25th March, 1983 passed under s. 263 of the IT Act, 1961. 2. Shri R. B. Modi and Shri A. C. Modi are the partners of M/s Modi Trading Co. They have deposited Rs. 50,000 each in the assessee-firm. The assessee-firm paid interest on the moneys deposited by them in the firm in their individual capacities. The ITO allowed interest paid on the deposits made by the partners of the firm. 3.....

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.... Act. On behalf of the assessee the reliance was placed on the judgment of the Madras High Court in the case of Venkatesh Emporium vs. CIT (1982) 137 ITR 593 (Mad) and T. M. N. M. Somasundara Nadar Sons vs. CIT (1982) 137 ITR (Mad). The CIT has observed that in the cases relied upon by the assessee firm. The assessee's representative has accepted the proposition that the HUF cannot become a partne....

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....m constitute payment of interest to the partners and, therefore, the same is inadmissible deduction under s. 40(b) of the Act. 6. the CIT has distinguished the judgment of the Madras High Court reported in (1982) 137 ITR 593 (Mad) and (1982) 137 ITR 815 (Mad). He has followed the judgment of the Allahabad High Court in the case of CIT vs. London machinery Co. (1979) 10 CTR (All) 301 : (1979) 11....

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.... of CIT, Nasik vs. Pannalal Hiralal & Co. (1983) 36 CTR (Bom) 414 : (1984) 149 ITR 549 (Bom), wherein the Bombay High Court has held that if an HUF through its manager is a partner of the firm them for the purpose of IT Act the interest received will be income of the HUF; while if any coparcener including manager has advanced a personal loan, the interest paid in respect of personal loan cannot be....