Judgment

M.N.VENKATACHALIAH,J.

(1) THESE special leave petitions arise out of and are directed against the orders of the High court of Judicature at Madras disposing of references made under S. 256(1) of the Income Tax Act, 1961 (the Act for short) in Tax Case Nos. 694 of 1982, 565 of 1980, 1404 of 1980, 637 and 638 of 1981, 521 of 1981, 429 of 1983 and 572 of 1983. The High court following its earlier pronouncement of that court in COMMISSIONER OF INCOME TAX v. O.M.S.S. Sankaralinga Nadar & Co. answered the question of law, similar in all the cases, in favour of the revenue. The question was whether in making a disallowance for the interest paid by a partnership firm to a partner under S. 40(b) of the Act the interest, in turn, paid by the partner on his borrowings from the firm should be taken account of and deducted and only the balance disallowed under S. 40(b).

(2) ON this question, there is a sharp divergence of judicial opinion in the High courts. In Sri Ram Mahadeo Prasad v. Commissioner of Income Tax, COMMISSIONER OF INCOME TAX v. Kailash Motors", COMMISSIONER OF INCOME TAX v. T.V. Ramanaiah & Sons", COMMISSIONER OF INCOME TAX v. Kothari & Co.,