R.K.Agrawal, J. - (1.) The Tribunal, New Delhi, has referred the following two questions of law under Section 256(1) of the IT Act, 1961, hereinafter referred to as the Act, for opinion to this Court : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in upholding the order of the learned CIT(A) deleting the disallowance under Section 40(b) of the IT Act, 1961, in respect of interest paid to Shyam Lal (HUF) of Rs. 16,565 and to Mahender Kumar (HUF) of Rs. 20,076 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in upholding the order of the learned CIT(A) regarding disallowance under Section 40(b) of the IT Act, 1961 in respect of interest paid to Shyam Lal Private Trust of Rs. 2,466 and to Mahender Kumar Private Trust of Rs. 2,474 ?"
(2.) Briefly stated the facts giving rise to the present reference are as follows : The respondent No. 3 is a registered firm deriving income from commission agency (Arhat) at Muzaffarnagar. The present reference relates to the asst. yr. 1978-79. The relevant accounting year ended on 10th Jan., 1978. It has eight partners, some of whom are HUFs and some are trusts. During the asst. yr. 1978-79, the respondent paid interest amounting to Rs. 16,565 to Shyam Lal (HUF) and Rs. 20,076 to Mahender Kumar (HUF). Both of them are partners. During the assessment year in question. The respondent had also paid interest of Rs. 2,466 to Shyam Lal Private Trust and Rs. 2,474 to Mahender Kumar Private Trust, who were partners in the said firm. The ITO disallowed the aforesaid amount under Section 40(b) of the Act. In appeal preferred by the respondents, the CIT(A) deleted the additions.
(3.) The Department feeling aggrieved preferred an appeal before the Tribunal. The Tribunal had found that the interest paid to the aforesaid HUF and trusts was to be added back under Section 40(b) of the Act only if there was no excess interest paid after adjustment of interest received from Shyam Lal (individual) and Mahender Kumar (individual) who had paid interest amount to Rs. 82,654 and Rs. 98,527, respectively, to the respondent-assessee.;