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2002 (12) TMI 71 - MADRAS HIGH COURTBusiness Expenditure - "Whether the Appellate Tribunal is right in law in holding that the interest payment of Rs. 1,38,940 made by the assessee to its partners is not hit by section 40(b) of the Income-tax Act, 1961?" - we hold that when section 171(9) of the Act statutorily declares a partial partition taking place after December 31, 1978, as null and void, the consequences and incidents which flow from such statutory declaration are that the Hindu undivided family shall be deemed to continue for the purpose of the Income-tax Act and it shall be the owner of the property and further it shall be deemed to be the recipient of the income from such property for the purposes of the Income-tax Act. Therefore, the interest payments made by the firm, though to the partners, shall be treated as if the firm has made the interest payments to the joint family and such payments are not hit by section 40(b) of the Act. Consequently, we are of the view that the Appellate Tribunal was correct in holding that the interest payments made are not disallowable under section 40(b)
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