Judgment :- N.V. BALASUBRAMANIAN, J. At the instance of the assessee, the following five questions of law have been referred to us for the asst. yr. 1981-82 for our opinion, "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the interest paid to partners representing the small HUFs should be disallowed under s. 40(b) of the IT Act, 1961 ? 2. Whether the Tribunal was right in holding that the decisions of the Madras High Court in Venkatesh Emporium vs. CIT and T.M.N.M. Somasundaram Nadar & Sons vs. CIT relied on by the assessee were not applicable to the assessee's case ? 3. Whether the Tribunal had any material to come to the conclusion that the HUF (minors) were not creditors of the assessee ? 4. Whether the Tribunal was right in its inference that the details furnished in the statement of accounts of the assessee-firm did not reveal that the HUF (minors) were the creditors inasmuch as the interest to such entries were not shown along with the category of interest paid to others notwithstanding the fact that in the accounts placed before it the payments of the interest accounts had been shown only as such ? 5. Whether the Tribunal had not erred in holding that there was nothing on record to show that the payments disallowed under s. 40(b) had been paid to the respective HUF (minors) as different entity altogether ?" 2. There were two firms by name M/s. Shenbagam Auto Works, Madurai and M/s. Shenbagam Tractors, Madurai. One R. Ratnasabai was a partner in M/s Shenbagam Auto Works and one Sri. P. V. Parthesarathy was partner in both the firms representing their bigger HUFs. For the asst. yr. 1981-82, the firm paid interest to the partners on several accounts viz., HUF (major), individual and HUF, (smaller HUF). The firm, while returning the income for the said assessment year, added back the interest paid to the partners in respect of HUF (major) (sic) ITO while computing the income of the assessee-firm, invoked the provision of s. 40(b) of the IT Act, and disallowed the interest paid to small HUF, A sum of Rs. 5, 663 paid to Sri. Ratnasabai and Rs. 1, 419 paid to Sri. 5, 663 paid to Sri. Ratnasabai and Rs. 1, 419 paid to Sri. P. V. Parthasarathy in the case of M/s Shenbagam Auto Works, Madurai, were disallowed by the ITO, and in the same manner, he disallowed the interest paid to smaller HUF in the other firm. 3. The assessee carried the matter in appeal before the CIT(A). The CIT(A) found that the smaller HUFs were different entities and the disallowance made by the ITO under s. 40(b) of the Act was not justified, and, directed the ITO to allow interest paid to smaller HUFs which was no doubt represented by the same Karta of the bigger HUF in the given, but, in a different capacity. The Revenue preferred an appeal challenging the order of the CIT(A). The Tribunal found from the deeds of partnership that the partners contributed capital which bears interest as mutually agreed upon and if the partners advance moneys to the firms by way of loans and advances, interest was payable on the current account of the partners, and it was immaterial that the interest was received for the beneficial enjoyment of the partners in their individual capacity or on behalf of the bigger HUF or small HUF and that the provisions of s. 40(b) of the Act were correctly invoked by the ITO and the disallowance made by him was justified. On an application preferred by the assessee, the Tribunal has stated the case and referred the questions of the law set out earlier. 4. Mr. P. P. S. Janardhana Raja, learned counsel for the assessee, submitted that the order of the Tribunal is erroneous as the Tribunal proceeded on the wrong assumption that the Karta of the smaller HUF was a partner in the firms and the smaller HUF was only creditor as the monies have been deposited by the smaller HUF. Learned counsel for the Revenue, on the other hand, submitted that the members of the smaller HUFs were also members of the bigger HUFs and the interest paid to the Karta was paid to him, in his representative capacity and, therefore, the provisions of s. 40(b) of the Act are applicable to the facts of the case. 5. We have carefully considered the rival submissions. 5. We have carefully considered the rival submissions. In our opinion, the questions have to be considered in the light of the provisions of s. 40(b) of the Act and Explanation introduced in the said section. Sec. 40(b) of the Act provides that in the case of any firm, any payment of salary, interest, bonus, commission or remuneration made by the firm to any partner of the firm shall be disallowed in computing the income chargeable under the head "profits and gains of business profession". An Explanation was introduced to s. 40(b) of the Act by the Taxation Laws (Amendment) Act, 1984. The Supreme Court in the case of Brij Mohan Das Laxman Das vs. CIT held that Expln. 2 of s. 40(b), of the Act, with which we are concerned, is declaratory in nature and would apply even for the periods prior to 1st April, 1985, on which date Expln. 2 to s. 40(b) was inserted. The said Explanation has full retrospective effect and under the said Explanation any interest paid by the firm to an individual otherwise than as a partner in a representative capacity, does not fall within the mischief of s. 40(b) of the Act. In other words, s. 40(b) of the Act would apply only where the interest was paid by the firm to the individual as a partner when he is in a representative capacity. 6. We have seen the facts of the case and they clearly show that it was the bigger HUF which was a partner and the Karta of the said family was representing the bigger HUF in both the firms. Therefore, it can be said that he was a partner in a representative capacity representing the bigger HUF in the two firms. On the other hand, the smaller HUF was not a partner in the firm and the Karta of the smaller HUF, though he happened to be Karta of the bigger HUF, was not representing the smaller HUF in the firm as a partner. In other words, his representative capacity was different and the amounts deposited by the smaller HUF were deposited in the character of the creditor. Under s. 40(b) of the Act if interest amount was received by him otherwise than, in the capacity of partner the provisions of s. 40(b) of the Act cannot be invoked. In other words, his representative capacity was different and the amounts deposited by the smaller HUF were deposited in the character of the creditor. Under s. 40(b) of the Act if interest amount was received by him otherwise than, in the capacity of partner the provisions of s. 40(b) of the Act cannot be invoked. It may be true that some of the members are common in both the families, but under the income-tax law both the joint families are different taxable entities and because some of the members are common in both the families would not make both families as one unit and it cannot also be presumed that the Karta was representing the smaller HUF as a partner. His capacity is different. In our view, the provision of s. 40(b) of IT Act do not apply to the facts of the case. 7. We are of the opinion that in view of the clear language employed in Expln. 2 of s. 40(b) of the Act and in view of the finding that only the bigger HUF was a partner in the two firms, there is no scope for application of the provisions of s. 40(b) of the Act, in so far as the interest paid by the firm to the Karta of the smaller HUF is concerned. In our view, the view taken by the Tribunal that the provisions of s. 40(b) of the Act are attracted is erroneous. 8. There are five questions that have been referred to us raising different facts of the same question regarding the applicability of s. 40(b) of the Act, and we consolidate all the questions of law referred to us as a single question and the question No. 1, as framed would take in all aspects. We reframe the questions referred to us as under, "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the interest paid to partners representing the small HUFs should be disallowed under s. 40(b) of the IT Act, 1961 ?" 9. Our answer to the question is in the negative, in favour of the assessee and against the Revenue. The assessee is entitled to costs of Rs. 750.