S. RANGANATHAN, J. ( 1 ) THESE are four income tax references at the instance of the assessee, a firm known as M/s. Sanghi Motors, pertaining to the assessment years 1966-67 to 1969-70. The common question involved in all these references lies within a very narrow campass. The assessee is a firm of eight partnres of whom three were partners of the firm in their capacity as the Kartas of their respective Hindu Undivided Family. To one of such persons, namely, Suresh Kumar Sanghi the firm paid salary, interest on deposits and bonus. It is common ground that Suresh Kumar Sanghi was a partner in the firm in his capacity as the Karta of his Hindu Undivided Family and that the income of the firm which fell to hisshare was assessed in the hands of the respective family and not included in his assessment as an individual. Equally it is common ground that the salary and the bonus were paid to Suresh Kumar Sanghi in respect of services rendered by him and were assessable as his individual income. So also the deposits made by him with the firm on which he derived interest were all deposits made by him out of his own individual funds and the interest in respect of those deposits also has been. assessed only in his hands as an individual. Thus. the income received from the firm by Suresh Kumar Sanghi was being assessed partly in the hands of the family and partly in his individual hands. Those assessments are not in dispute. The question which arises before us is whether in completing the assessments of the firm for the assessment years 1965-67 to 1969-70 the Income-tax Officer was justified in disallowing the salary, interest and bonus paid to Suresh Kumar Sanghi by applying the provisions of section 40 (b) of the Income-tax Act, 1961. The Income-tax Officer, the Appellate Assistant Commissioner as well as the Appellate Tribunal have all agreed that the disallowance has to be made. The Income-tax Officer, the Appellate Assistant Commissioner as well as the Appellate Tribunal have all agreed that the disallowance has to be made. The assessee was, therefore, aggrieved by the decision of the Tribunal and at its instance the following questions of law have been referred to us which, though differently phrased for different years, basically raise the common question as to the applicability of section 40 (b) in the circumstances outlined above : I. T. R. 131/75 (assessment year 1966-67) "whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the following amounts paid to S. K. Sanghi were not allowable as revenue expenditure of the firm Sanghi Motors : 1. Salary : Rs. 21,000. 00. 2. Interest : Rs. 7,014. 00. "i. T. R. 134175 (assessment year 1967-68) "whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the following amounts paid to S. K. Sanghi were not allowable as revenue expenditure of the firm Sanghi Motors : 1. Salary : Rs. 26,250. 00. 2. Interest : Rs. 5. 457. 00. I. T. R. 191175 (assessment year 1968-69 ). "whether on the facts and in circumstances of the case, the Tribunal was right in holding that the following amounts paid to Shri Suresh Kumar Sanghi were not allowable as revenue expenditure of the firm Sanghi Motors : 1. Salary and Bonus : Rs. 26. 250/ 2. Interest on deposits; Rs. 2. 030. 00. "whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the following amounts said to Sh. Suresh Kumar Sanghi were not allowable as revenue expenditure of the firm Sanghi Motors : 1. Salary Rs. 21,000. 00. 2. Interest on deposits Rs. 4,181. 00. 3. Bonus Rs. 5,250. 00. We may mention that though the question refers to the allowability of the items referred to earlier as revenue expenditure of the firm. it is clear that the allowability has to be decided in terms of section 40 (b) for in the event of section 40 (b) being applicable the items cannot be allowed as a deduction in computing the total income of the firm. ( 2 ) THE question raised before us is not res Integra. it is clear that the allowability has to be decided in terms of section 40 (b) for in the event of section 40 (b) being applicable the items cannot be allowed as a deduction in computing the total income of the firm. ( 2 ) THE question raised before us is not res Integra. There are a number of decisions on this issue which have been quoted and referred to in the recent decision of a Bench of this court in the case of Raj and Co. v. Commissioner of Income Tax (1979-121 ITR 911 (1),. In that case three out of four partners in a firm had entered into a partnership in their respective capacities as Kartas of the respective joint families. The firm paid various amounts as salaries to those persons for the servimnjhuy76ces renederd by them to the partnership and it was claimed that since the salary was paid to them in their individual capacities while they were partners in their capacities as Kartas of their respective families the disallowance of the salaries in the hands of the firm by applying the provisions of section 10 (4) (b) of the Indian Income-tax Act. 1922 to which corresponds section 40 (b) of the Income-tax Act, 1961 was not justified. This claim was rejected by this court. It was pointed out that it was a settled position that a Hindu Undivided Family as such cannot enter into a contract of partnership with another person or persons. When a Karta of a joint family enters into a partnership with others on behalf and for the benefit of his joint family it is he alone who becomes a partner of the firm vis-a-vis the other partners and outsiders. So far as the firm and its other partners are concerned it is the Karta or the person who has entered into the partnership who alone is recognised as a partner and neither the firm nor the other partners are concerned with any arrangements or equities that may be existing between such partner and the other members of his joint Family. This being the position it was pointed out that section 10 (4) (b) applies an absolute prohibition against allowance of expenditure in the nature of interest, salary or commission paid by a firm to any partner. This being the position it was pointed out that section 10 (4) (b) applies an absolute prohibition against allowance of expenditure in the nature of interest, salary or commission paid by a firm to any partner. It did not make the slightest difference whether the person, joining the firm as a partner entered into the partnership in his individual capacity or in a representative capacity and whether the amount that is paid to him will ultimately reach the family or his individual hands. This court in this respect followed the decisions of different High Courts which are referred to in its judgment. ( 3 ) SHRI Ratna, learned counsel appearing for the assessee, however, sought to contend that the prohibition in section 40 (b) does not apply to a case of the present type. He submitted that on general principles payments made by a firm to its partners would be allowable as an expenditure in the hands of the firm. Section 10 (4) (b) of the 1922 Act prohibited this and directed that in the computation of the total income of the firm, these payments should be added back. However, while dealing with the apportionment of the income of the firm among its various partners the Act directed in section 16 (l) (b) the reversal of this process. That section directed in the first instance a deduction of the amounts added back in the hands of the firm. It is only the residual income that has to be apportioned among the partners in their profit sharing ratio. To that has to be added in the hands of the concerned partner, only amounts in account of salary, interest or commission which he may have received from the firm. Comparing the provisions of section 10 (4) (b) and section 16 (l) (b) which correspond to section 40 (b) and section 67 (l) (b) of the 1961 Act Shri Ratna contended that the two provisions are complementary to each other and that having regard to the identity of language in the two provisions the disallowance under section 10 (4) (b) should be restricted to cases where the payments are taxable in the hands of the individual partner and the share income from the firm is also assessable in his hands. We are unable to accept this contention which runs counter to large number of judicial decisions on the interpretation of Section 40 (b) and its predecessor provision. There may perhaps be something to be said in a case where, though the partner represents the family, a payment is made by the firm, say by way of interest to the joint family in respect of advances made by it to the firm which the partner was not obliged to provide to the firm on the terms of the partnership deed. In such a case, perhaps, it could be said that the interest is paid not to the partner but to the joint family (see Addl. Commissioner of Income Tax v. Vallamkonda Chinna Balaiah Chetty and Co. , 1977-106 ITR 556 (2 ). But so far as the present case is concerned there is no scope for any relief. It is the individual who is the partner and the amounts with whichwe are concerned are amounts which are received by the partner from the firm and are also taxable in the hands of the partner as an individual. It is true that the share income from the firm, though derived by him as partner, is not assessed in his hands by reason of the fact that he is a partner in his representative capacity. The share income, though accruing to him as a partner in the firm, is therefore really treated as diverted by overriding title to the family which has an over-riding claim to it. In our opinion, however, the circumstance that the share income, which, in the normal course of events, would he taxed in the hands of the partner himself happens, in a case, not to be so taxable because of the representative character of the partner does not in any way condition the applicability of section 40 (b ). ( 4 ) SECTIONS 40 and 67 deal with two different situations. The former is concerned with the assessment of a firm and the principle on which it proceeds is that where a firm makes a payment of the categories mentioned to one of its partners the payment is really not an outgoing because basically it is a payment by a person to oneself. The former is concerned with the assessment of a firm and the principle on which it proceeds is that where a firm makes a payment of the categories mentioned to one of its partners the payment is really not an outgoing because basically it is a payment by a person to oneself. This stems from the principle that a firm is not a legal person or separate entity but only a compendious name for the partners who have combined together their capital, skill, labour etc. to carry on the business together on the basis of mutual agency. In this view of the matter any such payment by a firm to its partner would really be a payment towards his share of profits and is not an outgoing in the computation of the firm s income. Support for this line of reasoning is derived from the decision of the Supreme Court in the case of CIT v. Chidamberam Pillai (R. M.) (1977-106 ITR 292. S. C.) (3 ). In the application of this principle there is no logical reason for distinguishing between one payment made by the firm to a partner, from another whatever may be the capacity in which he receives it. It matters not whether he is a partner in his own right or as the guardian of a minor or as the trustee of a trust (private or public) or as a principal partner representing another sub-partnership and so on. But, so far as the firm is concerned, these accountabilities which exist between the nominal partner and other persons are totally irrelevant. ( 5 ) SECTION 67, on the other hand, deals with a totalr" different situation. It merely proceeds to set right the arithmetic of allocation which would otherwise go away. In the computation of the income of the firm the entire remuneration etc. paid to a partner had been added back. But in the working of the partnership itself, it is only the residual income that would be allocated. What is paid to one of the partners or some of them as remuneration or interest or the like cannot be apportioned among all the partners. paid to a partner had been added back. But in the working of the partnership itself, it is only the residual income that would be allocated. What is paid to one of the partners or some of them as remuneration or interest or the like cannot be apportioned among all the partners. In order to reconcile this situation, when it conies to the question of assessment of the partners, section 67 directs that the allocation of shares should be confined only to the residual income and that the interest, salary or remuneration should be added in the hands of the partner who receive it. This provision only relates to the assessment of a partner and has no bearing upon the question whether the share income is actually assessed in the hands of the partner or not. Notwithstanding section 67 (1 ) (6) of the Act if the share income which is allocable to a partner is derived by him in his capacity as the Karta of a. joint family it cannot be included in his hands. So also if the partner had entered into a sub-partnership it is only his smaller share and not the larger share that can be assessed in his hands despite the provisions of section 67 (l) (b ). We are, therefore, unable to see much significance in the circumstance on which Shri Ratna is placing very strong reliance viz. that the share income has not been assessed in the hands of the partner. We are unable to accept the contention that section 40 (b) should not be applied because the payments in question and the share of income from the firm fell for assessment in different hands, the former in the hand s of S. K. Sanghi and the latter in the case of his joint family. As we see it, the scheme of section 10 (4) (b) read with section 16 (l) (b) of the 1922 Act or section 40 (b) read with. action 67 (1) of the 1961 Act has nothing to do with the circumstances that either the payments or the share or both may not be ultimately assessed in the hands of the partner because the principle of diversion of income come in for application in cases where the partner represents other people who are in the background. action 67 (1) of the 1961 Act has nothing to do with the circumstances that either the payments or the share or both may not be ultimately assessed in the hands of the partner because the principle of diversion of income come in for application in cases where the partner represents other people who are in the background. ( 6 ) WE, therefore, do not see any reason to differ from the earlier judgments of this court in the case of Raj and Company (1979-121 ITR 911) and in the case of Panna Lal Girdhar Lal (1971-81 ITR 624 (4) referred to tiierin. We answer the question referred to us in the affirmative and in favour of the revenue. As the assessee has failed, he will pay the costs of the respondent (one set); counsel s fee Rs. 350. 00.