JUDGMENT

K. Venkataswami, J.-The question that has been referred to this Court under Section 257 of the Income Tax Act, 1961 (hereinafter called "the Act") reads as follows:

"Whether on the facts and circumstances of the case, the assessee s claim to the benefit of clause (b) of Section 40 of the Income Tax Act, 1961 has been rightly disallowed?.

2. The assessment year in question is 1976-77. The case of the assessee firm was that M/s. Shanti Kumar Jain, Asok Kumar Jain, Raj Kumar Jain and Niranjan were partners in the firm in their capacity as Karta of respective HUF. They have advanced monies to the assessee firm in their individual capacity. The assessee firm paid interest to them on the investments made in their respective individual capacity. It is the further case of the assessee firm that it has maintained two separate ledger accounts of the partners; one of individual as loan creditor and another of Karta of HUF as partners in the firm. The sources of the money, according to the assessee, are quite separate. The assessee firm claimed that the interest paid to them shall not be included while computing the income chargeable under the head "profits and gains of business or prof