Jagannatha Shetty, J.

1. The following question under s. 256(1) of the I.T. Act, 1961, has been referred:

"Whether, on the facts and in the circumstances of the case, interest payment of Rs. 11,365 to Smt. K. L. Gangamma, who was one of the partners of the firm on the date of payment of interest, can be disallowed under section 40(b) of the Income-tax Act,1961 ?"

2. The assessee is a firm. Originally it was constituted by an instrument dated November 21, 1969. Clause 10 of that instrument provides that in the event of death of a partner, the firm shall not be dissolved but shall be carried on by the remaining partners with the legal representatives of the deceased partner on such terms and conditions as may be agreed upon in that behalf by mutual consent. On July 30, 1973, Sri. K. L. Lakshmansa, one of the partners, died and a new partnership deed was executed on February 17, 1974, taking Smt. Gangamma, widow of Sri. K. Lakshmansa, as a partner with effect from July 31, 1973. She was taken as a partner since she represented the estate of her deceased husband.

3. Smt. Gangamma in her individual capacity advanced some amount to the firm and the firm paid interest on that amount