( 1 ) AT the instance of the assessce, the following two questions have been referred for the opinion of this Court:1. "whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the sum of Rs. 25,000. 00 and Rs. 18,950. 00should be added under Section 40 (b) of the Act, for the assessment year 1980-81. 2. Whether on facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the sum of Rs. 4. 296. 00 and representing interest paid on H. U. F. credit balances should be added under the provisions of the Section 40 (b) of the Income Tax Act, 1961 for the assessment year 1980-81. "

( 2 ) THE facts in brief arc as follows: The assessee is a firm dealing in fertilisers, pesticides, insecticides, oil engines etc. , besides doing money-lending business. The assessee paid salary of Rs. 25,000. 00 to the partners and credited interest to the partner s account on salary accumulations. The partners are partners in the firm in their capacity as the karthas of the respective joint families. The salary and the interest were paid to them in their individual capacity. The Income Tax Officer added the amounts to the income of the firm. The appellate authority agreed with the Income Tax Officer. On an appeal, the Tribunal confirmed the view of the appellate authority. At the instance of the assesscc, the first question was referred. As regards the second question, an amount of Rs. 4,296. 00was paid to the partner in this capacity as kartha of joint family. The Tribunal held that this amount has also to be added back to the income of the firm. At the instance of the assessee, question No. 2 was referred for the opinion of this Court.

( 3 ) THE learned Counsel appearing for the assessee relying on the judgment of this Court in N. T. R Estate v. Commissioner of Income Tax, (1986) 157 ITR 285 and A. Ramakrishaniah, B. Narayana and Co. v. CIT, (1994) 209 ITR 156, contended that in the case of a partner of a firm in his capacity as the kartha of HUF, any salary paid to him cannot be added to the income of the firm. While the Counsel for the revenue contended that this is a salary paid to the partner in his individual capacity and not to the partner representing the HUF. Therefore, it is to be added to the income of the firm under Section 40 (b) of the Income Tax Act. Learned Counsel also submitted that the judgment in N. T. R. Estate (supra) and judgment in A. Ramakrishnaiah, B. Narayana (supra) are not correctly decided and require reconsideration.

( 4 ) IN N. T. R. Estates v. CIT, the question that arose for consideration is whether the salary payment of Rs. 15,000. 00 in the assessment year 1973-74 and Rs. 24,000 in the assessment year 1974-75 are attracted by Section 40 (b) of the Income Tax Act, 1961, and are not deductible? This Court held that:". . . IN order to determine whether the salary paid to a partner should be allowed as a deduction in computing the income of the partnership firm, it is necessary to examine who is the real recipient of the salary paid to the partner. If the recipient is a kartha of a HUF and the payment of salary has no real sufficient connection with the share held by the joint family through the partner concerned, then the salary paid to the partner for his individual services cannot be disallowed in the computation of the income of the partnership firm. If, however, the real recipient of the salary is the joint family, although it was paid ostensibly to the partner, then the salary paid falls to be disallowed under Section 40 (b) of the Act. "

( 5 ) ON the facts of that case, the learned Judges held that salary and interest paid by the firm to some of the partners as individuals, while they had become partners in their capacity as kartas of Hindu undivided families during the accounting years relevant to the assessment years 1973-74 and 1974-75 could not be disallowed under Section 40 (b ).

( 6 ) IN A. Ramakrishnaiah, B