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Section 40(b) of the Income-tax Act, 1961 - Business disallowance - Interest, salary etc. paid by firm to any partner - Assessment year 1976-77 - Whether in view of the CIT v. Nitro Phosphetic Fertilizer [1988] 174 ITR 269 interest paid by assessee registered firm to its partners in their individual capacity who represented their respective HUFs as karta, was liable to be disallowed - Held, yes FACTS The assessee was a registered firm. During the relevant assessment year, there were five partners. They were represented in their capacities as kartas of their respective HUFs in the firm. The assessee paid certain amount by way of interest to two of the partners on the deposits made by them in their individual capacities. This was disallowed by the ITO. However, the Tribunal allowed the appeal filed by the assessee following its own decision in another matter. On reference: HELD In view of the Full Bench decision of this court in CIT v. Nitro Phosphetic Fertilizer [1988] 174 ITR 269, it was held that amount of interest in question was not deductible in computing the income of the assessee firm. Note: The reference was decided against the assessee. CASE REFERRED TO CIT v. Nitro Phosphatic Fertilizers [1988] 174 ITR 269 (All.)(FB). JUDGMENT B.P. Jeevan Reddy, CJ.-Under section 256(1) of the Income-tax Act, 1961, the Tribunal has stated the following question:…

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