( 1. ) THIS Full Bench has been constituted for resolving the conflict in two sets of opinion by different High Courts regarding the application of Section 40 (b) of the Income-tax Act in respect of payment of interest to the partner of a firm as a non-allowable or allowable deduction. In fact, there are two conflicting decisions of this court in Jalamchand Mangilal v. CIT [1982] 138 ITR 343 and 347 and in Balchand Hashmatrai and Co. v. CIT [1986] 161 ITR 121 which have been noticed by this court in Sobhagmal Phoolchand v. CIT (infra p. 541) and the matter has been referred to a larger Bench. One view is that irrespective of the capacity in which a person joins a partnership firm and is paid interest by the firm, Section 40 (b) is a bar to payment of interest to the partner of the firm as an allowable deduction, while the other view is that when the interest is paid to a partner in a somewhat different capacity, the amount has to be deducted as an allowable deduction. ( 2. ) BRIEFLY, the facts of the present case are that reference has been made under Section 256 (1) of the Income-tax Act, at the instance of the Commissioner of Income-tax by the Income-tax Appellate Tribu