COMMISSIONER OF INCOME TAX Vs. MANDAKINI M JOG

JUDGEMENT

(1.) BY this reference under S. 256(1) of the IT Act, 1961. The Tribunal has referred the following questions of law to this Court for opinion at the instance of the assessee :

(2.) THE facts which are relevant for the purpose of this reference are as under : The assessee is a partner in the firm of M/s V.M. Jog & Co., Pune, which held fixed deposits in the Bank of Maharashtra on which it earned interest. The assessee's share income included the firm's proportionate business profits as well as proportionate share of interest income. In respect of the proportionate share of interest income, the assessee claimed deduction under S. 80L of the IT Act ("the Act") for the asst. yrs. 1976 77 and 1978 79. The ITO disallowed the said claim. On appeal by the assessee, the AAC allowed the said deduction following the judgment of the Allahabad High Court in CIT vs. Brij Raman Das (1979) 9 CTR (All) 50 : (1979) 118 ITR 387 (All) : TC 26R.475. The Revenue carried appeals to the Tribunal. The Tribunal followed the decision of Allahabad High Court on which the AAC had placed reliance and upheld his order. The appeals filed by the Revenue were, therefore, dismissed. It is against this background that the present reference is made to this Court.

(3.) OUR attention was drawn to the decision of this Court in CIT vs. Gopalkrishna M. Singre (1995) 126 CTR (Bom) 304 : (1995) 214 ITR 443 (Bom) : TC S26.2704. In that case the assessees were partners in a firm. The firm derived income from interest on Central Government securities and deposits, including deposits with banking companies. For the asst. year 1973 74, the assessees claimed deduction under S. 80L of the Act in respect of the share of profits from the firm which represented "interest on Government securities and interest on deposit from banking companies". The ITO rejected the claim for deduction on the grounds that it was the firm which had earned income from interest on the fixed deposits and securities and not the assessees who were partners thereof and that the nature of the income in the hands of the partner changed its complexion and it partook of the character of "share of profits from the firm". The CIT(A) upheld the orders of the ITO. The Tribunal accepted the contention of the assessees.