Tola Ram Sons Dal Mill vs Commissioner of Income Tax

At the instance of the assessee the Income Tax Appellate Tribunal 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 salary and interest paid by the assessee-firm to its partners, S/Sri Jeevan Mal and Chandan Mal was disallowable u/s 40(b) of the Income Tax Act, 1961 and to be added back to the total income of the assessee-firm for assessment years 1978-79 and 1979-80" ?

We have heard Sri Piyush Agarwal, learned advocate for assessee and Sri Prakash Krishna, learned advocate appearing for the revenue and have perused the records of the case.

It is not in dispute before us that the question involved in the instant. Reference has already been settled by several decisions and the learned counsel for the parties have also submitted that so far as the salary aspect is concerned the same is not to be deductible in view of the judgment and decision of the Madras High Court in the case of R.M. Appavuchettiar Sons v. CIT (2002) 256 ITR 289 . Accordingly, we answer the reference in regard to salary part in favour of the revenue and against the assessee. So far as the aspect of interest is concerned, in M/s. Suwalal Anadilal Jain Vs. Commissioner of Income Tax, Bihar-II, Ranchi, , the Supreme Court has held against the revenue and in favour of the assessee.

In the result, so far as salary part is concerned the reference is decided in affirmative, in favour of the revenue and against the assessee and in regard to interest part, the same is decided in negative in favour of the assessee and against the revenue.

The reference is accordingly disposed of.