1981 (7) TMI 36

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....long with his brothers in an HUF. On August 16, 1966, there was a partial partition in Nagarathna Nagar's family. In that partition, Rs. 50,000 was allotted to Nagarathna Nadar's share. This amount which was called shestabagam was credited to a separate account in the books of the assessee-firm in which Nagarathna Nadar was a partner in his individual capacity. The amount carried interest. The interest was also credited in the firm's books in the shestabagam account relating to the family. In the profit and loss account of the firm, the amount of interest payable to the family under the shestabagam account was deducted as an outgoing. It was claimed as a deduction in the computation of the profits of the firm for the firm's income-tax for t....

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.... capacity he might have received it. Against this decision of the Tribunal, the present reference has been made by the Tribunal at the instance of the assessee-firm, on the following question of law : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the interest paid on the sum of Rs. 50,000 for assessment years 1971-72 and 1972-73 has to be disallowed under section 40(b)? A question of this kind arose recently before a Bench of this court, of which one of us was a party in Venkatesh Emporium v. CIT (vide T. C. Nos. 13 to 15 of 1977, judgment dated July 20, 1981) [1982] 137 ITR 593. In that case too, a joint family as such had made advances to a firm and was in receipt o....

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....t family being treated as a person who was entitled, and who actually obtained, the payment of interest from the firm. The above decision, in the manner aforesaid, fully covers the present case as well. The facts which had been noted by the Tribunal in this case were: While Nagarathna Nadar was a partner in the assessee-firm in his individual capacity, there was a partial partition in his joint family and sum of Rs. 50,000 was allotted to his share, which was brought and credited to a separate account in the books of the partnership firm, and which earned interest. The facts of this case, as found by the Tribunal, are on all fours with the facts which figured in the unreported decision (Venkatesh Emporium v. CIT) (since reported in [1982....