- (1.) On an application under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following common question for the assessment years 1981-82 and 1982-83 for our opinion : "Whether, on the facts and in the circumstances of the case and on a correct interpretation of Section 40A(8) of the Income-tax Act, 1961, the Tribunal was justified in law in holding that Section 40A(8) of the said Act is not applicable on the interest paid on the surplus of current account of the director, Shri H. P. Lohia ?".
(2.) The matter was listed 2/3 times. None appeared for the assessee. We proceed to hear learned counsel for the Revenue. Heard learned counsel for the Revenue.
(3.) The assessee is Hari Finance and Trade (P.) Ltd. and the assessment years involved are 1981-82 and 1982-83. During the course of assessment, the Assessing Officer has noticed that interest has been paid to one Shri Hari Prosad Lohia, on his deposit with the assessee-company. The Income-tax Officer disallowed 15 per cent. of the interest paid, invoking the provisions of Section 40A(8) of the Act. The Tribunal has allowed the claim of the assessee following the decision of the Madhya Pradesh High Court in the case of CIT v. Kalani Asbestos (Put.) Ltd. and held that in the case of current deposit of the director in the company, the provisions of Section 40A(8) are not applicable.;