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High CourtsDivision Bench(1996) 07 P&H CK 0011

P.N. Berry and Co. vs Commissioner of Income Tax

Punjab And Haryana At Chandigarh · Decided on 8 July 1996 · Citation: (1997) 91 TAXMAN 114

HON’BLE JUDGES
N.K. Agrawal, J · Ashok Bhan, J
CASE NUMBER
IT Reference No. 103 of 1983

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Judgment

6 paragraphs · 406 words
1.

At the instance of the assessee, the following question of law has been referred to us by the Tribunal, Amritsar Bench, Amritsar, for opinion:-

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the interest paid to a HUF whose Karta was a partner in the representative capacity could be treated as interest paid to the partner and disallowed u/s 40(b) of the income tax Act, 1961?"

The assessee is a firm in which Shri J.K. Beri was a partner in the accounting period ending 31-3-1978, relevant to the assessment year 1978-79. J.K. Beri, undisputedly, was a partner in the assessee-firm representing his HUF and in this reference we are concerned only with the disallowing of interest paid in respect of HUF account by the ITO u/s 40(b) of the income tax Act, 1961, J.K. Beri, in fact, had received interest from the firm in two accounts, one styled as J.K. Beri (HUF) and the other Shri J.K. Beri in his individual capacity. The ITO disallowed the interest paid in both the accounts u/s 40(b), being interest paid to the partner.

As stated above, in the present reference, we are concerned only with the disallowing of interest paid in respect of the HUF account. The counsel for the assessee fairly concedes that the question referred to us is to be answered in the affirmative, i.e., against the assessee and in favour of the revenue, in view of the decision of this Court in the Hindustan Steel Forgings Vs. Commissioner of Income Tax, .

Accordingly, we answer the question referred to us in the affirmative, against the assessee and in favour of the revenue.

2.

The counsel for the assessee then argued that the assessee had been disallowed interest paid in both the accounts by the assessee-firm u/s 40(b), resulting in injustice. Since, the interest is being disallowed to J.K. Beri (HUF), the interest paid to J.K. Beri in his individual capacity could not be disallowed. In a petition u/s 256 of the Act, the High Court is concerned with the answer to the question referred to it and not to any other matter. We refrain to make any observation in this regard. However, we leave it to the assessee to raise this point before the Tribunal when the matter is taken up by the Tribunal for giving effect to the order answering the reference. No costs.