RAM MAHADEO PRASAD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Tribunal has referred the following question for the opinion of this court:

(2.) THE facts necessary for answering the question are short. THE assessee is a partnership firm, and carried on business of flour mill and had a tin factory at Kanpur. During the previous assessment year relevant for 1971-72, it had advanced certain sums of money to its partners and it also had taken loans from them. It had paid interest on the amount borrowed, and received interest on the amounts advanced. THE assessee's contention was that the interest paid to the partners should be deducted from its total income, and in the alternative contended that only that amount that remained after deducting the interest paid from the interest received from the partners, could be added to its income. This contention was rejected by the ITO in view of Section 40(b) of the Act. Both the AAC and the Tribunal have held likewise. THE deductions claimed by the assessee could not be sustained in view of Section 40(b) of the Act, which is in the following words :