INCOME TAX OFFICER Vs. GANESH FACTORY
INCOME TAX APPELLATE TRIBUNAL
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N.K. AGRAWAL, J.M. : -
(1.) THESE are two appeals, by the Revenue, relating to asst. yrs. 1980-81 and 1981-82. Since they relate to the same assessee and there are common issues involved, these are being disposed of by this consolidated order.
(2.) Ground No. 1 in both the appeals relate to the amounts of salary and interest paid to the partners of the firm. In the year relevant to asst. yr. 1980-81, salary amounting to Rs. 28,800 and interest of Rs. 7,778 was paid to the partners. In the next assessment year, amount of salary was Rs. 36,000 and interest Rs. 24,549. The Assessing Officer disallowed both the claims under s. 40(b). The first appellate authority, however, accepted the assessees plea that both the deductions are allowable because the partners who received salary and interest represented their respective HUFs in the capacity of Karta. Interest was paid to be allowable on the ground that the partners in question had invested their individual money. Similar view was taken by the first appellate authority with respect to salary. There were four partners in the firm, out of whom three, namely, Sh. Daya Nand, Dharamvir and Madan Lal have been paid salary for their personal services and two of them have been given interest on their personal investments.
The learned Departmental Representative has argued that the deductions were in accordance with the provisions contained in s. 40(b) and, therefore, the view taken by the first appellate authority is contrary to law and not sustainable.
(3.) THE learned counsel has, in reply, invited our attention to the decision of the Punjab and Haryana High Court in the case of Hindustan Steel Forgings vs. CIT (1990) 82 CTR (P&H). In that case, it has been held that if a person is a partner in a firm in a representative capacity, namely, as a Karta of an HUF and if such partner lends money to the firm belonging to him individually, then the interest paid by the firm to such partner on the monies lent by him is deductible in computing the firms income. We find that the matter has been finally concluded by the jurisdictional High Court and, therefore, we find that the first appellate authority has taken a correct view with respect to the payment of interest.;
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