JUDGMENT

B.P. Jeevan Reddy, J.-Clause (b) of Section 40 of the Income Tax Act specifies one of the amounts which shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession". As it stood at the relevant time, it read thus:

"40. Notwithstanding anything to the contrary in sections 30 to 39, the following amounts shall not be deducted in computing the income chargeable under the head Profit and gains of business or profession ,-

(b) in the case of any firm, any payment of interest, salary, bonus, commission or remuneration made by the firm to any partner of the firm.

Explanation 1: Where interest is paid by a firm to any partner of the firm who has also paid interest to the firm, the amount of interest to be disallowed under this clause shall be limited to the amount by which the payment of interest by the firm to the partner exceeds the payment of interest by the partner to the firm.

Explanation 2 : Where an individual is a partner in a firm on behalf, or for the benefit, of any other person [such partner and the other person being hereinafter referred to as partner in a representative capacity and person so represented respe