The Income tax Officer while disallowing the amount of interest paid to partners did number set off the interests received from the partners on their own borrowings.
This reference under Section 256 1 of the Act was regis tered in the High Court as Tax Case No.
In the assessees appeal, the Appellate Assistant Commissioner of Income Tax by his order dated 18.10.1977 allowed the claim of the appellant that only the net interest paid to the partners, after setting off the interest received from them, was to be disallowed.
With this disallow ance, the income of the firm was assessed at Rs.2,79,730.
From the Judgments and Order dated 5.3.85, 21.1.85, 25.2.85, 11.2.85, 14.10.85, 11.2.85 and 20.10.86 of the Madras High Court in T.C. Nos.
The Tribunal, as did the Appellate Assistant Commissioner, placed reliance on the decision of the Allahabad High Court in Sri Ram Mahadeo Prasad v. C.I.T., 24 ITR 176 All .
1985 answered the question in the negative and against the appellant relying, as stated earli er, on its earlier pronouncement in Sankaralinga Nadars case.
The High Court following its earlier pronouncement of that Court in Commissioner of Income tax v. O.M.S.S. Sankaralinga Nadar Co., 147 ITR 332 answered the question of law, similar in all the cases, in favour of the revenue.
694/82 and the High Court by its order dated 5.3.
The appellant, M s. Keshavji Ravji Co. is a registered firm companysisting of 6 partners and car ries on a business in the manufacture and export of stain less steel articles.
CIVIL APPELLATE JURISDICTION Civil Appeal Nos.
In the accounting year ended 13.11.
The Judgment of the Court was delivered by VENKATACHALIAH, J. These Special Leave Petitions arise out of and are directed against the orders of the High Court of Judicature at Madras disposing of references made under Section 256 1 of the Income Tax Act 1961 Act for short in Tax Case Nos.
Broadly, similar are the circumstances under which the other appeals arise.
A. Ramachandran and Mrs. Janki Ramachandran for the Appellant.
For the relevant assessment year, the appellant filed a return disclosing a total income of Rs.2,55,225.
694 of 1982, 565 of 1980, 1404 of 1980, 637 and 638 of 1981, 521 of 1981, 429 of 1983 and 572 of 1983.
1177 to 1184 NT of 1990.
C. Manchanda, B.B. Ahuja and Ms. A. Subhashini for the Respondent.
1974, companyresponding to the assessment year 1975 76, the firm paid interest to the partners on the amounts standing to their respective credits in the firm.
The firm also received from the partners interest on their borrowings from the firm.
694/82,565/80, 1404/80, 637/81,638/81,521/81,429/83 and 572/83.
Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was companyrect in holding that net interest should be disallowed under section 40 b of the Income tax Act, 1961 ?
At the instance of the revenue the Tribunal stated a case and referred the following question of law for the opinion of the High Court.
The Revenue took up the matter in further appeal before the Income Tax Appellate Tribunal which by its order dated 6.1.1979 dismissed the appeal and affirmed the appellate order of the Assistant Commissioner.
