COMMISSIONER OF INCOME TAX vs SOORAJMUL NAGARMULL.

SUHAS CHANDRA SEN, J. :

The Tribunal has referred the following questions of law under s. 256(1) of the IT Act, 1961 :

"1. Whether, on the facts and in the circumstances of the case and having regard to the provisions of s. 40(b) of the IT Act, 1961, the Tribunal was legally justified in holding that the interest paid by the partner, Shri D. N. Jalan should be adjusted against the interest credited to the said partners benami account standing in the name of Bai Pannas mother ?

Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the entire gratuity liability of Rs. 65,21,907, if found correct as per actuarial valuation, was an allowable deduction in computing the total income for the asst. yr. 1972-73 ?"

In this proceeding the assessment year involved is 1972-73 for which the corresponding accounting period is 2028 R.N.

The controversy raised in respect of the first question has been set at rest by a circular issued by the CBDT bearing No. 33D (XXV-24) of 1965. Apart from this particular circular the Allahabad High Court in the case of Sri Ram Mahadeo Prasad Vs. Commr. of Income Tax, United Provinces, Lucknow, and the Andhra Pradesh High Court in the case of Commissioner of Income Tax Vs. T.V. Ramanaiah and Sons, have held that the interest paid by the partner should be adjusted against the interest credited to the partners account in the firm.

The circular is binding on the Department. Apart from that, the consistent views of the different High Courts appear to be in consonance with the circular. In that view of the matter question No. 1 is answered in the affirmative and in favour of the assessee. In view of the decision of this Court in the case of Commissioner of Income Tax (Central-I) Vs. Eastern Spinning Mills Ltd., the second question is also answered in the affirmative and in favour of the assessee.

There will be no order as to costs.

BHAGABATI PRASAD BANERJEE, J. :

I agree.