TMI Blog1986 (7) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... parvam'. In both the pictures, Shri N.T. Rama Rao acted as hero. The firm paid Rs. 1,00,000 (Rs. 50,000+Rs. 50,000) to Shri N.T. Rama Rao for acting in the above two pictures and the said amount was debited to the 'production accounts' of the aforesaid two films. The firm also paid Rs. 10,000 to Shri N. Balakrishna who acted in the picture 'Sreeramapattabhishekam'. The assessee claimed that the payments of Rs. 1,00,000 and Rs. 10,000 were made to Shri N.T. Rama Rao and Shri N. Balakrishna as cine artists for acting in the pictures produced by the firm and no disallowance under section 40(b) can be made. The ITO did not accept this submission. He held that in whatever capacity payment is made by a firm to a partner such payment has to be dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a as cine artists acted in the films produced by the assessee-firm for which the firm paid Rs. 1,00,000 to Shri N.T. Rama Rao and Rs. 10,000 to Shri N. Balakrishna. The payments made to them were for acting in the films produced by the firm. It was not a payment made to them for any services rendered as partners but it was payment made to them as artists for acting in the films produced by the firm. Such payments made to partners in their capacity as artists for acting in the films produced by the firm are not hit by section 40(b). 5. In CIT v. Gemini Productions [1977] 110 ITR 847 (Mad.), the assessee, a firm, was constituted for the business of production and distribution of cinema films. Gemini Pictures Circuit (P.) Ltd. was a partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, we shall first consider the question whether there was any income of the assessee-firm out of which commission was paid to Gemini Pictures Circuit Private Ltd., Madras." It was further observed as under: "... Consequently, the very first requirement, namely, that the amount out of which the commission is paid must be the income of the firm of which the recipient is a partner is absent in the present case. If so, there is no scope for applying section 10(4)(b) of the Indian Income-tax Act, 1922." In Harihar Cotton Pressing Factory v. CIT [1960] 39 ITR 594 (Bom.), the assessee was a firm which ran a cotton pressing factory. Four of its five partners were co-operative societies. The firm pressed cotton for four of its partners. It cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also credited to the accounts of the respective HUFs. The capital was not contributed by the partners but was contributed by the HUFs and consequently the interest also was debited to them. On those facts the question arose whether the interest paid is disallowable under section 40(b). The Andhra Pradesh High Court held that having regard to the facts of that case section 40(b) has no application and interest payments made to the HUFs could not be disallowed. 6. An identical issue was considered by the Tribunal, Hyderabad Bench 'B' in Tarakarama Film Unit's case. In that case also the firm paid remuneration of Rs. 10,000 to Shri N. Balakrishna, one of the partners, for acting in the film produced by the firm. The question arose whether ..... X X X X Extracts X X X X X X X X Extracts X X X X
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