TMI Blog1985 (3) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... will take up appeal Nos. 3661 and 3662 by the assessee against the order of the Commissioner under s. 263 relevant to the asst. yrs. 1978-79 and 1979-80. The main issue for our consideration in these appeals is whether the Commissioner has erred in directing the ITO to disallow the sum of Rs. 5,321 under s. 40(B) in the asst. yr. 1978-79 and Rs. 19,175 in the asst. yr. 1979-80 on the ground that the above interest was paid to Shri Ratansi Hirjee in his individual capacity, while Sri Ratansi Hirji was the partner in the assessee-firm in the capacity in Karta of his HUF viz. Ratanji (HUF). 3. The relevant facts are assessments in the two years under consideration were completed on 8th Dec., 1978 and 6th Nov., 1979 respectively. Thereafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of CIT vs. Pannalal Hiralal Co. (1983) 36 CTR (Bom) 414 (1984) 146 ITR 549 (Bom). Their Lordships has taken the view that if an HUF through its manager is a partner of the firm, then for the purpose of the IT Act, the interest received will be the income of the HUF. While if any coparcenor including the manager had advanced a personal loan, interest paid in respect of the loan cannot be treated as interest paid to the HUF which is a partner through the manager. 'V' was a partner in the assessee-firm in his individual capacity as a representative of the HUF. The interest received by him was not in his capacity as a representative of the HUF but in his capacity as the individual. Therefore, interest paid to his individual capacity w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1,499 in asst. yr. 1982-83. According to the ld. counsel Sri Maskai, following the decision of the Gujarat High Court in the case of CIT vs. Sajjan Raj Diwanchand (1981) 21 CTR (Guj) 26 : (1980) 126 ITR 654 (Guj), no disallowance should be made especially when the Supreme Court has dismissed the special leave petition in that case. On the other hand, ld. the departmental representative relied on the order of the CIT(A). We have heard the rival submissions and considered the material on record. the issue is dealt with by their Lordship of the Bombay High Court in the case of Pannalal Hiralal Co. and the view has been taken that when the HUF is a partner through its manager in the firm, the interest received in respect of the amount rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed. That is not the situation here. We are not persuaded to agree with the approach made in the case reported in CIT vs. sajjan Raj Diwan Chand (1981) 21 CTR (Guj) 26 : (1981) 126 ITR 654 (Guj) for the reason we have explained herein. We think that decision has necessarily to be overruled." Therefore, following the decision of Their Lordship of the Bombay High Court in the case of Pannalal Hiralal Co. and the latest decision of the Full Bench of the Gujarat High Court in the case of L. Chotalal Co., we find no force in the cross objections filed by the assessee. 9. in the result, the assessees appeals in ITA Nos. 3661 3662 are allowed, while the appeals of the Revenue and assessee's cross-objections are dismissed. - - T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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