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2014 (11) TMI 888 - GUJARAT HIGH COURTDisallowance u/s 40(b) - Whether the dis-allowance of the finance, commission paid to proprietary concern of the partner under provisions of Section 40(b) was justified – Held that:- Section 40(b) deals with the commission or interest etc. made to a partner and not to an individual, where amounts were advanced by such individual from his personal fund - Shri. Doshi was the sole proprietor of Saurashtra Metal Supplying Co. and Jayant Trading Company, which provided financial assistance to the assessee - the Tribunal held that what was paid to Mr. Doshi, whether, it is ‘Commission’ or ‘interest’, is liable to be disallowed u/s 40(b) - the advances made by Mr. Doshi to the assessee firm were from his personal fund and the commission or interest paid by the assessee to Shri. Doshi was in his individual capacity and not as a partner – it was not liable to be disallowed in view of the clear provisions of Section 40(b). In the case of Trust also, which provided financial assistance to the assessee, Shri. Doshi was one of the trustees and on the basis of the same, the AO hold that the amount was paid by the assessee to one of the partners, i.e. Shri. Desai, which is also quite contrary – relying upon Chhotalal And Co. Versus Commissioner Of Income-Tax, Gujarat [1984 (4) TMI 40 - GUJARAT High Court] - the AO could not have disallowed the amounts paid by the assessee to Shri. Doshi – Decided in favour of assesee.
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