JUDGMENT
1. The Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, has referred the following question under Section 256(2) of the Income-tax Act, 1961 (for short, "the Act"), for opinion of this court :
"Whether the Tribunal was legally correct in holding that in the case of the partner of a registered firm, deduction under Section 80L of the Income-tax Act is allowable in respect of his share income in the firm as allocated in terms of the provisions of Section 67(2) of the Act ?"
2. The facts as stated in the statement of case by the Appellate Tribunal are that the assessee is an individual, that during the accounting year corresponding to the assessment year 1974-75 he was a partner in Purshottam Das Rais, Gorakhpur, that the said firm had interest income, inter alia, that the income from interest accrued mainly on fixed deposit receipts or on bank accounts; consequently, the assessee claimed deduction under Section 80L of the Act in respect of his share in the income of the aforesaid firm having accrued under the head "Interest", that the said claim of the assessee was not considered by the assessing authority ; that the assessee then appealed to the Appellate Assistant Commissioner who considering the provisions of Sub-section (2) of Section 67 of the Act, directed the assessing authority to allow the assessee's claim under Section 80L ; and that the Revenue then carried the dispute to the Income-tax Appellate Tribunal which confirmed the order of the appellate authority. This is how the aforesaid question was referred to this court at the instance of the Revenue.
3. Sub-Section (2) of Section 67 of the Act provides that the share of a partner in the income or loss of the firm, as computed under Sub-section (1) shall, for the purposes of assessment, be apportioned under the various heads of income in the same manner in which the income or loss of the firm has been determined under each head of income. Section 80L(1), in so far as relevant, states that where the gross total income of an assessee, being an individual includes any income by way of interest on the items enumerated in Sub-clauses (i) to (x), there shall, in accordance with and subject to the provisions of this Section, be allowed, in computing the total income of the assessee, a deduction as specified. From Section 80L it is, therefore, clear that an individual is entitled to deduction in respect of interest income accruing under Clauses (i) to (x). In this case the appellate authority and the Tribunal both held that the interest income, which accrued in the hands of the partnership concern, retained the same character after allocation in the hands of the assessee--an individual, and, therefore, he was entitled to deduction in respect of interest income under Section 80L.
4. In CIT v. Brij Raman Das [1979] 118 ITR 397 (All), which has already been relied upon by the Tribunal in this case, it was held that income under each head accruing to a partnership firm will retain its character as such even though it is assessed all over again in the hands of the individual partner. This court further held that the process of allocation of the income in the hands of the partner does not change the head under which it was determined in the case of the firm, In short, it was held that the character of income will remain the same before and after the allocation of income in the hands of the partners. This authority was followed by the Bombay High Court in CIT v. Gopalkrishna M. Singre [1995] 214 ITR 443. The Orissa High Court, however, took a contrary view in CIT v. Janardan Subudhi [1981] 131 ITR 287.
5. We are quite persuaded by the view taken by the Allahabad High Court in the case of Brij Raman Das [1979] 118 ITR 397 which was followed by the Bombay High Court in Gopalkrishna M, Singre [1995] 214 ITR 443.
6. Following the view taken by this court in Brij Raman Das [1979] 118 ITR 397, we answer the aforementioned question in the affirmative, that is, in favour of the assessee and against the Revenue.