TMI Blog1984 (9) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... on under s. 256(i) of the I.T. Act, 1961, has been referred : " Whether, on the facts and in the circumstances of the case, interest payment of Rs. 11,365 to Smt. K. L. Gangamma, who was one of the partners of the firm on the date of payment of interest, can be disallowed under section 40(b) of the Income-tax Act, 1961 ? " The assessee is a firm. Originally it was constituted by an instrument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to Smt. Gangamma during the year relevant to the assessment year 1974-75, which in all came to Rs. 11,365. The ITO disallowed the said payment under s. 40(b) of the I.T. Act. The assessee appealed to the AAC who allowed that claim of the firm on the ground that s. 40(b) of the Act was not attracted to such payment since it was paid to Smt. Gangamma in her individual capacity on her own funds a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputing the income chargeable under the head 'Profits and gains of business or profession',-...... (b) in the case of any firm, any payment of interest, salary, bonus, commission or remuneration made by the firm to any partner of the firm; " The scope of this section is no longer in dispute. It imposes a bar to allowances in respect of any payments by way of interest, salary, bonus, commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing to do with the allowances prohibited under s. 40(b). partner may have a dual capacity as an individual by himself or as a representative of another assessable entity, but when once he becomes partner, the bar imposed under s. 40(b) is immediately attracted. Therefore, the Tribunal, in our opinion, is not correct in taking into consideration the dual capacity of Smt. Gangamma while considering ..... X X X X Extracts X X X X X X X X Extracts X X X X
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