TMI Blog1983 (11) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... n 256(2) of the Income-tax Act by the Income-tax Appellate Tribunal, Bangalore: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that only the net amount of interest paid by the firm to the partner should be disallowed under section 40(b) in the firm's assessment ? " The assessee is a firm of nine partners. In respect of each partner, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to state that section 40(b) provides that in the case of any firm, any payment of interest made by the firm to any partner of the firm is not to be deducted. But in the appeal preferred against the order of assessment for the year 1975-76, the Appellate Assistant Commissioner upheld the order of the Income-tax Officer. Aggrieved by the order of the Appellate Assistant Commissioner, the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of interest, salary, bonus, commission or remuneration made by the firm to any partner of the firm. " While dealing with the above clause (b) of the section, the Tribunal has observed: " The claim of the Department is that while there is an express provision under section 40(b) prohibiting deduction from the firm's income of any payments by way of interest made by it to the partner, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w urged by the Department would be only to give an advantage to firms who keep the accounts in a particular way while that would be denied to firms, like the present one, which, for the sake of convenience, keep separate accounts one for capital and one for drawings of each partner. In our opinion, the word 'payment of interest' referred to in section 40(b) refers to the actual net amount of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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