- (1.) THE Income -Tax Appellate Tribunal, New Delhi has referred the following question of law under section 256(1) of the Income -Tax Act, 1961, ('the Act'), for opinion to this court. 'Whether on the facts and circumstances of the case, the Appellate Tribunal was legally correct in holding that Explanation 2 inserted below section 40(b) of the Act w.e.f. 1 -4 -1985 is clarificatory and applicable to all pending assessments of earlier years also and deleting the disallowance made by the ITO under section 40(b) of the Income -Tax Act.'
(2.) THE present reference relates to the Assessment year 1983 -84. The respondent/assessee is a registered firm. It had paid interest aggregating to Rs. 37,097 to the following persons: (i) Rs. 20,147 Sri Bishambar Nath (ii) Rs. 3,752 Sri Harish Chandra (iii) Rs. 856 Shri Sita Ram Aggarwal and (iv) Rs. 12,342 Shri Narish Chandra who were partners in the firm in representative capacity. The interest paid as aforesaid was on their deposits in individual capacity. The income -tax officer invoking the provisions of section 40(b) of the Act disallowed the claim of deduction of the interest while computing the total income of the respondent -assessee. On appeal, the Appellate Assistant Commissioner upheld the disallowance. On further appeal before the Tribunal deleted the additional relying upon the decision of the Gujarat High Court in Chhota Lal & Co. v. CIT : [1984]150ITR276(Guj) .
(3.) WE have heard Sri Shambhoo Chopra, learned standing counsel. Nobody has appeared on behalf of the respondent -assessee.;