| Case ID |
0bb86375-c3f7-4f1c-becd-591da22d1cf0 |
| Body |
View case body. Login to View |
| Case Number |
Income-tax Reference No. 71 of 1984 |
| Decision Date |
Feb 22, 1989 |
| Hearing Date |
|
| Decision |
The Punjab and Haryana High Court held that the interest paid to the coparceners after a partial partition of the Hindu undivided family was not an admissible deduction under section 36(1)(iii) of the Income Tax Act, 1961. The court ruled that the partial partition made on March 31, 1979, was invalid as per the provisions of section 171(9) of the Act, which states that any such partition after December 31, 1978, is not to be recognized. Consequently, the contributions made by the Hindu undivided families continued as partnerships, and any interest payments made to the coparceners were effectively payments to the Kartas of the families, which are disallowed under section 40(b). Thus, the tribunal's decision to allow the deduction was overturned, and the interest paid was deemed non-deductible. |
| Summary |
In the landmark case of Income-tax Reference No. 71 of 1984, the Punjab and Haryana High Court addressed critical issues surrounding the applicability of the Income Tax Act, 1961, particularly focusing on the implications of partial partition within Hindu undivided families. The case revolved around the Tej Cloth Weaving Factory, where the court scrutinized the interest deductions claimed by the firm on loans purportedly made by coparceners following a partial partition on March 31, 1979. Highlighting the significance of section 171(9), the court concluded that such partitions made after the cutoff date are invalid, thereby preventing the firm from treating these amounts as borrowed capital for business purposes. This decision emphasizes the stringent interpretations of tax laws regarding family partnerships and the importance of compliance with statutory provisions. The ruling reinforces the need for careful consideration of partnership contributions and interest deductions under the Income Tax Act, which continues to impact tax planning strategies for Hindu undivided families engaged in business. |
| Court |
Punjab and Haryana High Court
|
| Entities Involved |
Not available
|
| Judges |
GOKAL CHAND MITAL, JJ.,
S.S. SODHI, JJ.
|
| Lawyers |
Not available
|
| Petitioners |
COMMISSIONER OF INCOME TAX
|
| Respondents |
TEJ CLOTH WEAVING FACTORY
|
| Citations |
1991 SLD 640,
1991 PTD 245
|
| Other Citations |
Not available
|
| Laws Involved |
Income Tax Act, 1961
|
| Sections |
36(1)(iii),
171(9),
40(b)
|