1991 PLP 51 (PTD)
GHASILAL KASTURCHAND Versus COMMISSIONER OF INCOME-TAX
| Citation | 1991 PLP 51 (PTD) |
| Forum / Court | Madhya Pradesh High Court (India) |
| Bench Members | G.G. Sohani, Actg. C.J. and R.K. Verma, J |
| Parties | GHASILAL KASTURCHAND Versus COMMISSIONER OF INCOME-TAX |
| Primary Law | Income-tax |
Q1: What are the key laws and sections cited in 1991 PLP 51 (PTD)?
This judgment primarily cites: Income-tax as referenced in Pakistani case law index.
Q2: Which judicial bench decided the case 1991 PLP 51 (PTD)?
The case was heard and decided by the Madhya Pradesh High Court (India) bench comprising: G.G. Sohani, Actg. C.J. and R.K. Verma, J.
Q3: What is the official citation format for this judgment on Pakistan Law Portal?
Cite this legal precedent as: 1991 PLP 51 (PTD) (GHASILAL KASTURCHAND Versus COMMISSIONER OF INCOME-TAX). Read the full summary and cross-referenced laws free on Pakistan Law Portal.
Laws Cited
Headnotes / Summary
Karta of Hindu undivided family partner in firm in his representative capacity
Karta lending money to firm in his individual capacity
Interest paid by firm to Karta is deductible in computing firm's income. If a person is a partner in a firm in a representative capacity, e.g., a Karta of a Hindu undivided family becoming a partner in a firm representing a Hindu undivided family, and if such partner lends to the firm moneys belonging to him individually, then the interest paid by the firm to such partner on the moneys lent by him is deductible in computing the firm's income. C.I.T. v. Narbharam Popatbhai and Sons (1987) 166 ITR 534 M P fol. K.R. Mandovera for the Assessee. R. C. Mukati for the Commissioner.
Judgment & Decree
G.G. SOHANI, ACTG. C. J.--By this reference under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this Court for its opinion: "Whether, on the facts and in the circumstances of the case, the Income tax Appellate Tribunal was legally correct in holding that the interest amount of Rs. 10,650 paid by the assessee-firm to Shri Umraomal, in his individual capacity, was liable to be disallowed in the hands of the firm under section 40(b) of the Income-tax Act, 1961?" The material facts giving rise to this reference, briefly, are as follows: The assessee is a registered firm and the assessment year in question is 1978-79. One Shri Umraomal was a partner of the assessee-firm as representative of his Hindu undivided family, Umraomal Kasturchand. A sum of Rs.10,650 was paid by the assessee-firm as interest to Shri Umraomal on the amount lent by Umraomal to the assessee-firm in his individual capacity. The Income-tax Officer, while framing the assessment, held that the interest amount of Rs. 10,650 paid to Shri Umraomal in his individual capacity was not deductible in view of the provisions of section 40(b) of the Act. The appeal preferred by the assessee before the Appellate Assistant Commissioner was dismissed. The assessee, thereupon, filed a second appeal before the Tribunal, which was also dismissed. Aggrieved by the order passed by the Tribunal, the assessee sought reference and it is at the instance of the assessee that the aforesaid question of law has been referred to this Court for its opinion. At the time of hearing, learned counsel for the parties conceded that the matter arising in this case is concluded by the judgment of a Full Bench of this Court in C.I.T. v. Narbharam Popatbhai and Sons (1987) 166 ITR
534. In that case, it has been held that if a person is a partner in a firm in a representative f capacity and if such partner lends to the firm any money in his individual capacity, then the interest paid by the firm on the amount so lent by him would not be liable to be added back under section 40(b) of the Act. Following that decision, it must be held that the Tribunal was not right in holding that the interest amount of Rs. 10,650 paid by the assessee to Shri Umraomal in his individual capacity was liable to be disallowed in the hands of the assessee-firm under section 40(b) of the Act. Our answer to the question referred to this Court is therefore in the negative and in favour of the assessee. In the circumstances of the case the parties shall bear their own costs of the this reference. M. B. A./791/T Question answered in negative.