The scheme of the IT Act, 1961, shows that the firm and its partners are treated as two separate legal entities so far as the provisions of tax law are concerned. While framing an order of assessment under the provisions of the IT Act, 1961, the firm and its partners are to be treated as two separate legal entities and payment of interest to a firm cannot be treated in the tax law as payment of interest to its partners.
Enactment of new provisions in the Income-tax Act, 1961, instead of reducing more than not, increases litigation This is either because of the ambiguity or lack of clarity in the provision enacted or the manner in which the newly enacted provision is applied The present case falls in the second category as we shall presently see
