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HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE

Commissioner of Income Tax, Bombay v. M/s Kanji Shivji and Co.

Civil Appeal No. 9777 of 1995
[2000] 1 SCR 365 ·
40(b), Explanation 2 (version introduced from 1 April 1985)

Reasoned final decisionAssessee firm
Download AKHB noteFive-part research note
Sources & disclosures includedDownload original judgment / order

Three-judge bench · S.P. Bharucha, J. · A.P. Misra, J. · N. Santosh Hegde, J.

01 · Facts of the case

Revenue’s appeal was referred to a three-judge Bench because a two-judge decision had doubted the conclusion of an earlier three-judge Bench. The question concerned the temporal character of the historical Explanation 2 to section 40(b) (physical page 1).

The short order does not state the assessment year, amount of interest, deposit history or precise capacity of this firm’s partners. Those facts are not supplied from the cited cases or inferred from the title.

Source: See the proposition-specific paragraph and PDF-page references below.

02 · Discussion by the Hon’ble Court

Brij Mohan Das Laxman Das had treated the Explanation as declaratory, and the three-judge decision in Suwalal Anandilal Jain had accepted that view. Rashik Lal expressed doubt but immediately acknowledged that no question of payment of interest arose in its case. The present Bench therefore classified Rashik Lal’s observations about that Explanation as obiter, rather than a competing binding decision of the interest issue (physical page 2).

The Court reaffirmed the earlier decisions as the correct exposition and followed them to dispose of this appeal. Its reasoning addresses this historical Explanation and the precedential status of the particular observations; it does not overrule Rashik Lal wholesale or declare every explanation retrospectively effective.

Source: See the proposition-specific paragraph and PDF-page references below.

03 · Judicial decision

Revenue’s civil appeal was dismissed, without costs. The case was finally disposed of after the reference; it was not left awaiting another bench (physical page 2).

Source: See the proposition-specific paragraph and PDF-page references below.

04 · Outcome / in whose favour

In whose favour: Assessee firm

Revenue appeal dismissed; no costs

Final ruling that the identified historical Explanation is declaratory

No invented assessment-year facts, no universal partner-interest deduction, no wholesale rejection of Rashik Lal on its own issues.

Source: See the proposition-specific paragraph and PDF-page references below.

05 · AKHB REVIEW POINT

Check what issue the earlier bench actually had to decide, its size and the statutory version it considered. A statement on an interest question expressly absent from that case was treated as obiter here. That does not erase an earlier judgment’s unrelated holdings.

Version control is particularly important. The official-hosted 2011 compilation records section 40(b)’s substitution from 1 April 1993 and shows different Explanation numbering within the substituted scheme (pages 298–299). Do not mechanically substitute its Explanation 2 for the pre-1993 Explanation discussed in this order or infer that every payment satisfying the historical capacity distinction is deductible under later law. The case’s missing transactional facts remain unknown.

Source: See the proposition-specific paragraph and PDF-page references below.

Proposition-specific source paragraphs and PDF pages

  • topic
    Identity, actual three-judge bench and referred issue
    source url
    Open cited source
    pdf pages
    1
    paragraphs
    Unnumbered judicial text
    source role
    reported metadata and judicial text
  • topic
    Declaratory character, obiter distinction and final dismissal
    source url
    Open cited source
    pdf pages
    2
    paragraphs
    Unnumbered judicial text
    source role
    judicial text
  • topic
    Substituted section and numbering boundary
    source url
    Open cited source
    pdf pages
    298; 299
    paragraphs
    Section 40(b), Explanations and footnote 33
    source role
    bounded historical statutory text

Judicial authorship and separate opinions

Order of the Court; no individual author identified

Act identified in the reviewed source

Income-tax Act, 1961

Source & verification

Download original judgment / order · Open cited source rendition

Identified source rendition: 2 PDF pages; SHA-256 df2a5146f975242a88e3ba35b224db954860eb2f3ffee36628f7c2fdb2a9b3ae. Original bytes preserved. Entire two-page Court order, including opening at physical page 1/SCR 365 and final disposal at page 2/SCR 366.

  • The frozen metadata describes two judges and omits A.P. Misra; the actual cover lists three judges and the opening expressly describes a three-judge Bench. The source image controls.; No assessment year, interest amount or detailed taxpayer facts are printed. Facts from Brij Mohan, Suwalal or Rashik Lal are not imported into this case.; The order’s historical Explanation 2 must not be equated by number alone with Explanation 2 in the substituted post-1993 section 40(b).; Rashik Lal’s observations about this Explanation were held obiter; the Court did not say every holding in that judgment was overruled.

Statutory scope

No automatic mapping to the Income-tax Act, 2025 or present-law certification. Apply the statutory text for the relevant year.

Later treatment

Source checked 2026-10-04. Comprehensive subsequent judicial and statutory treatment has not been verified. Only the expressly identified bounded comparisons have been checked. No current-law or Income-tax Act, 2025 mapping is certified.

Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.

Identified source links

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The official 1961–2025 structural correspondence does not establish that a precedent applies under the new Act. Verify the enacted wording, commencement and transitional provisions separately.

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