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Section 261 of the Income-tax Act, 1961 - Appeal to Supreme Court - Whether question that if a person was a partner in a firm in a representative capacity and lends to partnership moneys belonging to him individually, then interest paid to such partner on moneys lent by him was not liable to be added back under section 40(b), was a substantial question of law of general importance and, therefore, was to be certified fit to be decided by Supreme Court - Held, yes Facts On a reference In the case of the assessee-firm, the Full Bench of the present High Court held that if a person was a partner in a firm in a representative capacity and if such partner lends to the partnership moneys belonging to him individually, then the interest paid to such partner on the moneys lent by him is not liable to be added back under section 40(6). On an application under section 261: Held Undoubtedly, the Question involved which came up for consideration before the Full Bench of the present Court, was a substantial question of law of general importance. Further since there was divergence of opinion among various High Courts, this was a fit case where the question involved might be decided by the Supreme Court so that the controversy might be finally set at rest. Accordingly, it was certified that the case involved a substantial question of law of general importance which needed to be decided by the Supreme Court. Cases referred to CIT v. Hansa Dyeing & Printing Works [1976] CTR 482, CIT v. Raghavji Anandji & Co. [1975] 100 ITR 246 (Bom.), Chhotalal & Co.v. CIT [1984] 150 ITR 276 (Guj.) (FB), N.T.R. Estate v. CIT [1986] 157 ITR 285 (AP) and Balchand Hashmatrai & Co. v. CIT [1986]161 ITR 121 (MP). Editor's note The controversy has been set at rest by amendment of section 40(b) of the Taxation Laws (Amendment) Act, 1984, with effect from 1-4-1985. JUDGMENT Ojha, CJ. - The following question of law was referred to this Court for its opinion under section 256(1) of the Income-tax Act, 1961 ('the Act'): "Whether the Tribunal was correct in allowing the assessee's claim for interest paid on the credit balance in the individual account of Shri Prakashchand ?" 2. The facts in…

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