Interest Paid by Firm to partners cannot be disallowed U/s. 14A

In this case basic issue to be decided was about the interest payment made by the partnership firm to the partners in light of the provisions of section 14A read with rule 8D of the Rules. ITAT held that the interest paid by the firm to its partners and claimed as deduction is simultaneously susceptible to tax in the hands of its respective partners in the same manner. In the same vain, the firm is merely a compendium of its partners and its partners do not have separate legal personalities under the basic law as discussed. The interest paid to partners and simultaneously getting subjected to ...