TMI Blog1978 (1) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... which Terla Parasuramulu, the father of Terla Veeraiah, was the karta. The HUF was carrying on wholesale business in cloth. There was a partition between Terla Parasuramulu, his son, Terla Veeraiah, and his grandson, Terla Srisailam. After partition, the three divided members constituted themselves into a partnership firm by a deed dated December 12, 1962. Parasuramulu died on January 9, 1969. The partnership continued even after his death. Parasuramulu did not leave any other person except his son, Veeraiah, as his heir. He, therefore, succeeded to Parasuramulu's properties including the capital standing to his credit in the firm. Veeraiah was being assessed as a HUF in respect of the share income from the partnership firm. The account st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, invited our attention to the findings of the Tribunal to contend that on those findings the Tribunal was in error in holding that s. 40(b) comes into operation. Section 40(b) of the I.T. Act says : " Notwithstanding anything to the contrary in sections 30 to 39, the following amounts shall not be deducted in computing 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." It is Mr. Anjaneyulu's case that the payment of interest of Rs. 7,890 was not to Terla Veeraiah in his capacity as partner of the firm but it was paid to Terla Veeraiah as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be extracted with advantage. " On the above findings, the question that still remains to be considered is whether section 40(b) would be applied. We do not think that there can be any scope for the argument that the section would not be applied. We have already indicated that Terla Veeraiah as a partner was having his account under the style as 'Terla Veeraiah Hindu undivided family Account'. In respect of properties inherited by Terla Veeraiah from his father, also we think as per our conclusion, the same must belong to Terla Veeraiah as Hindu undivided family. Therefore, the interest was paid to Terla Veeraiah in the capacity of karta representing his Hindu undivided family. To put it in a different manner, the interest is credited to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee-firm. As already noticed the facts here are different. Two separate accounts were maintained from the beginning by the assessee, one HUF account and the other individual account and the interest was being separately credited to the two separate accounts. It is not a case where the assessee first credited the interest to his individual account and later transferred it to the account of the HUF for the revenue to say that the payment of interest is not deductible under s. 40(b). In Addl. CIT v. Chinna Balaiah Chetty and Co. [1977] 106 ITR 556, this court held that where money was advanced by the joint family, the interest realised by the joint family on that capital does not come within the purview of s. 40(b) of the Act. For t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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