1975 (11) TMI 25

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....ed by SAMBASIVA RAO, ACTG. C.J.-- The following question was sought to be referred to this court in this case : " Whether, on the facts and in the circumstances of the case, the amount of Rs. 4,068 paid by the firm as interest on the capital invested by the Hindu undivided family which was represented by its karta in it was a payment of interest to a partner of the firm within the meaning of....

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.... four partners of the firm with equal shares, Ramachandraiah was one of them representing his Hindu undivided family. In the. partnership deed, there was no stipulation as to investment of capital by any of the partners. Ramachandraiah's family advanced some money to the firm and it was credited to the firm in the name of Ramachandraiah, who was also the karta of the family. Up to the assessment y....

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.... section 40(b) of the Act, it was later changed to Ramachandraiah's family account. The Tribunal found that the change was only in clarification of the actual position. Consequently, the amount paid as interest was not to Ramachandraiah as partner but to Ramachandraiah's family, which had advanced the amount. So the payment does not come within the mischief of section 40(b) of the Act. Relying ....

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....] 106 ITR 283 (AP) by pointing out that in the case on hand the amount shown in the capital accounts of the partners initially was not the capital invested by the partners but was the money advanced by the joint family. In fact, the partners were not required to invest any capital according to the terms of the partnership deed. The money in this case, unlike the cases referred to, really belonged ....