HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Devi Cine Projector Manufacturing Co. and connected appellants v. Commissioner of Income Tax
Civil Appeal Nos. 1185–1188 (NT) of 1990
[1990] 1 SCR 268 ·
Income-tax Act, 1961: sections 40(b), 256(1), 256(2) · Constitution of India: Article 136
Sources & disclosures includedDownload original judgment / order
3-judge bench · M. N. Venkatachaliah, J. · N. D. Ojha, J. · J. S. Verma, J.
01 · Facts of the case
The Tribunal, in Revenue appeals, treated the entire interest paid by firms to their partners as disallowable under section 40(b), without setting off interest paid by those partners on borrowings from the firms. It declined references under section 256(1). The Madras High Court rejected the assessees’ section 256(2) applications, relying on O.M.S.S. Sankaralinga Nadar & Co. Four special-leave petitions challenged those refusals.
02 · Discussion by the Hon’ble Court
The Court held that its decision in Keshavji Ravji & Co. covered the point and undermined the earlier High Court approach. Ordinarily the Court would remit the reference applications to the High Court, which would direct the Tribunal to state a case before the reference returned for disposal. With the legal issue settled, that sequence would be an avoidable formality. The Court instead treated the petitions as directed against the Tribunal’s main appellate orders and granted leave.
03 · Judicial decision
The Tribunal’s section 256(1) orders and the High Court’s orders in Tax Case Petitions 739/1985, 313/1985, 260/1984 and 42/1986 were set aside. The Tribunal’s appellate orders were also set aside only insofar as they concerned the extent of section 40(b) interest disallowance. Those appeals were remitted to the Tribunal for fresh disposal on that point in light of Keshavji Ravji. No order as to costs.
04 · Outcome / in whose favour
The assessees obtained procedural and appellate relief through a fresh Tribunal determination. The Court did not itself quantify the permissible netting or delete the full interest disallowance in these cases.
05 · AKHB REVIEW POINT
AKHB analysis: distinguish the governing precedent from the separate appeals that apply it. For historical partner-interest computations, establish the mutuality and connection with partnership funds required by Keshavji Ravji rather than assume every cross-payment qualifies. When the law is settled, seek precise consequential relief and identify the limited issue remitted; this decision does not dispense generally with statutory appellate procedures.
Source: AKHB analysis based on judgment paras 3–6; SCR pp. 270–271 / PDF pp. 3–4
Source & verification
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- Official JUDIS primary source corroboration located at https://api.sci.gov.in/jonew/judis/7669.pdf; note is based on full SCR source.
Statutory scope
Historical section 40(b) partner-interest dispute. Apply the provision governing the relevant assessment year; no mapping to the Income-tax Act, 2025 is inferred.
Later treatment
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