COMMISSIONER OF INCOME TAX Vs. SAJJANRAJ DIVANCHAND

JUDGEMENT

(1.) IN this case, at the instance of the revenue, the following question :

(2.) IN this case we are concerned with the assessment year 1972 -73, the previous year being Samvat Year 2027. The assessee is a registered firm carrying on business of adat in cloth. Samvat Year 2027, the previous year, commenced on October 31, 1970, and ended on October 19, 1971. The assessee -firm had three partners out of whom. Sajjandan Jwaladas, had joined the firm in his capacity as the Karta of the joint Hindu family of Sajjandas Jwaladas. During the accounting year under consideration the assessee -firm had paid interest amounting to Rs. 7,777 to the said HUF. The ITO, impliedly applying the provisions o s. 40(b) of the I.T. Act, disallowed the deduction of the said expenditure. The assessee went in appeal to the AAC but the appeal on this point was dismissed. On further appeal, the Tribunal held that the view taken in the case of this very assessee by a Bench of the Tribunal or the assessment year 1971 -72 was the correct view and following that view the Tribunal held that the amount of Rs. 7,777 should be allowed to be deducted as an expenditure in the assessment of the firm. Thereafter, at the instance of the revenue, the question hereinabove set out has been referred to us for out opinion.

(3.) WHILE going through the order of the Tribunal in the instant case we find that the Tribunal has merely followed its own earlier decision in respect of assessment year 1971 -72. When we turn to that order we find that it was conceded before the Tribunal in that case that there were two distinct and separate accounts. One in the name of Sajjandas Jwaladas, and the other in the name of the HUF o Sajjandas Jwaladas. It was also conceded that the interest in question was paid to the HUF of Sajjandas Jwaladas by crediting that amount to that account. But the contention of the department was that it was the HUF of Sajjandas Jwaladas which was in reality a partner in the firm and not Sajjandas Jwaladas, the individual, and, therefore, there was payment to one of the partners of the firm which was clearly disallowable under s. 40(b) of the Act, and that argument was repelled by the Tribunal.