Law:

Section:

Section 40(b), read with section 256 of the Income-tax Act, 1961 - Business disallowance - Interest, salary, etc. paid by firm to partner - Whether question as to whether, on due consideration of fact that G was a separate, independent and genuine entity, it was legally correct for Tribunal to say that payment made to said entity on credit balance as undisputedly appearing in their account represented payments made to partners and as such that sum was disallowable under section 40(b), was a statable question of law - Held, yes FACTS The Tribunal held that the payment made to G, which was considered to be a genuine entity, on the credit balance as appearing in their account represented payments made to the partners and disallowed the said sum under section 40(b). The Tribunal also declined to make a reference under section 256(1). On application under section 256(2). HELD The question formulated in the application was a statable question of law. Therefore, the Tribunal was directed to drow up a statement of the case and refer the question as to whether, on due consideration of the fact that 'G' was a separate, independent and genuine entity, it was legally correct for the Tribunal to say that the payment…

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