COMMISSIONER OF INCOME TAX Vs. SWASTIKA METAL WORKS

JUDGEMENT

(1.) AT the instance of Revenue, the Tribunal, Chandigarh Bench, Chandigarh (for short the Tribunal), has referred the Court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of s. 40(b) of the IT Act, 1961, will not apply in the case of the assessee -

(2.) ASSESSEE is a registered firm consisting of 10 partners. In addition to share of profit, nine partners also received interest on their capital. While computing its income, the assessee had added an amount of Rs. 91,200 on account of 1983, claiming that interest paid to six partners namely, Darshan Lal Jain, Nem Chand Jain, Jainder Kumar Jain, Vijayder Kumar Jain, Jarender Kumar Jain and Deepak Jain amounting to Rs. 74,840 could not be treated as interest paid to partners as it had been paid to their HUFs. This claim was disallowed by the AO on the ground that all the above - mentioned six partners were partners in representative capacity representing their respective HUFs and, therefore, the interest paid to their HUFs was in fact interest paid to partners and was, therefore, governed by the provisions of s. 40 (b) of the Act.

(3.) ASSESSEE preferred an appeal before the CIT(A), Chandigarh, who accepted its claim and deleted the addition of Rs. 74,840.