Madras High Court
Commissioner Of Income Tax vs Nagappa Trading Corporation on 12 December, 1983
JUDGMENT Ramanujam, J.
1. In these reference applications, the revenue seeks a direction to the Tribunal to refer the following two questions for the opinion of this court.
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the sum of Rs. 11,407 and Rs. 15,529 being interest paid by the assessee to Sri N. L. R. Lakshmanan, partner, cannot be added back u/s. 40(b) of the Act, for the asst. yrs. 1973-74 and 1974-75 ?
2. Whether, on the facts and in the circumstances of the case the Tribunal was justified in holding that the provisions of s. 147(b) cannot be validly invoked ?"
So far as the first question is concerned, it is seen that a similar question has been answered by this court in favour of the assessee and against the revenue in Venkatesh Emporium v. CIT (1982) 137 ITR 593 (Mad), and also the decision dt. 19-2-1983 in T.C. No. 1403 of 1977. Notwithstanding the said two decisions, when the revenue sought reference on a similar question in T.C.P. No. 406 of 1982, this court rejected that application by an order dt. 26-4-1983. Further it is seen now that in rejected of a similar question, the Supreme Court the Special Leave Petition filed against the judgment of the Gujarat High Court holding that the interest paid to an HUF which was a creditor of the assessee firm was not interest paid to the Karta of the HUF who was a partner in the firm in his capacity as Karta and was, therefore, not liable to be disallowed u/s. 40(b) of the IT Act, 1961 as is seen from CIT v. Sajjanraj Divanchand (1983) 144 ITR (St.) 15). Having regard to the above circumstances this court will not be justified in directing a reference on question No. 1 coming to question No. 2, while dealing with the first question, we have dealt with the merits of the assessment and held against the revenue. The second question is merely academic and, therefore, we are not directing a reference on the second question as well. The petition is, therefore, dismissed.