1989 (2) TMI 41

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....decision by this court : "Whether, on the facts and in the circumstances of the case, and on a proper construction of section 40(b) of the Income-tax Act, 1961, the total amount of interest of Rs. 36,771 paid by the assessee-firm to its partners was not rightly disallowed by the Income-tax Officer while computing the total income of the assessee ?" From the statement of the case, it appears ....

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.... be considered for the purposes of section 40(b) of the Act. In taking this view, the learned Tribunal granted relief on the aforesaid decision of the Allahabad High Court. Shri Choudhuri, appearing for the Department, has urged that in the face of the language of section 40(b) of the Act, there can be no manner of doubt that the entire amount of interest paid by the firm to the partners cannot....

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.... to any partner of the firm who has also paid interest to the firm, the amount of interest to be disallowed under this clause shall be limited to the amount by which the payment of interest by the firm to the partner exceeds the payment of interest by the partner to the firm." It seems that the Explanation was inserted keeping in view the pronouncements of different High Courts of the country r....