T.N.C. RANGARAJAN, J.M. These appeals are directed against order of CIT made under s. 263 to make disallowance under s. 40(b) of IT Act, 1961. 2. admitted facts are as follows. assessee is firm consisting of nine partners. Two of partners, Shri Kishorilal Arora and Sri Chandra Kumar Arora represented their respective joint families in partnership firm. capital was contributed from funds of HUF and no interest was payable thereon. two partners in their individual capacity had credit balances in accounts of firm on which interest was paid in following sums: . 1981-82 1982-83 Sri Kishoilai Arora Rs. 35,975 Rs. 57,7 29 Sri Chandrakumar Arora Rs. 7,500 Rs. 8,880 Sec. 40(b) of IT Act, 1961 provides that in cases of firm, any payment of interest to any partner of firm shall not be deducted in computing income. assessee-firm did not deduct interest paid to two partners in their individual capacity on ground that real partners were only joint families and not individuals. income returned without deducting interest paid to two individuals was accepted by ITO while making assessment. On review of those assessment, Commissioner was of opinion that they were erroneous insofar as they were prejudicial to interest of Revenue, inasmuch as provisions of s. 40(b) had not been properly applied for disallowing deduction of interest to two individual partners. After hearing assessee, who relied on amendment to sec. 40(b) by introduction of theExplanation, Commissioner. directed add back under s. 40(b) on ground that amendment was prospective and did not apply to assessment years in question. 3. In appeals before us it was contended on behalf of assessee that though Explanations were introduced to s. 40(b) by Taxation Laws (Amendment) Act, 1984 w.e.f. 1st April,., 1985, they were only classificatory and that applied even to assessment year before that date. Reliance was placed on decision of Andhara Pradesh High Court in NTR Estate vs. CIT (1985) 49 CTR (AP) 85: (1986) 157 ITR 285 (AP). 4. On other hand it was contended on behalf of Revenue that Madras High Court has held in case of Venkatesh Emporium vs. CIT (1982) 137 ITR 593 (Mad) and Dwarkadas Rameshwar Goenka vs. CIT (1980) 18 CTR (Mad) 66: (1981) 127 ITR 397 (Mad) that individual in whatever capacity must be disallowed under s. 40(b). It was also pointed out that C Bench of Tribunal had also applied those cases in ITA Nos. 1806 & 1672/Mad/85 in t h e case of Rm. Appavu Chettiar to assessment years prior to introduction of amount. 5. On consideration of rival submissions, we are of opinion that assessee is entitled to succeed. No doubt, it is well established that only individual can be partner of firm and whatever be his representative capacity, as between partners concerned, individual alone is partner and not joint family or trust which he may represent. With this principle, if we look at wronging of s. 40(b) it would appear that while it calls for disallowance of interest paid to partner it would mean disallowance of any interest paid to individual who is partner of firm notwithstanding his representative capacity in firm. This is position which had been explained by Madras High Court in case of Vankatesh Emporium (1982) 137 ITR 593 (Mad) (supra) and Dwarkadas Rameshwar Goenka (1981- 127 ITR 397 (Mad) (supra). But question arose whether it would be proper to make disallowance of interest paid to him on funds advanced in representative capacity when he is partner in his individual capacity and vice versa, since in realty interest was paid to person who was not being represented in firm. That led to conflict of judicial opinions as noticed by Andhra Pradesh High Court in case of NTR Estate (1986) 157 ITR 285 (AP) (supra). That conflict was taken note of by Parliament which introduced Expln. 2 and 3 to s. 40(b) by Taxation Laws (Amend) Act, 1984 which came into force on 1st April,., 1985. Andhra Pradesh High Court has also held after considering intention of amendment that this Explanation was introduced to avoid inconvenience to taxpayers and reduiceligation especially when it was aware of conflict of taxpayers and reduiceligation especially when it was aware of conflict of judicial opinions among High Courts on this issue. Therefore, it was held that these amendments were classificatory in nature and explained meaning of section from inception and not intending of section from inception and not intended to amend effect of section prospectively. Expln. 2(i) clearly provides that interest paid by firm to individual otherwise than in representative capacity where he represents another person of firms shall not be credited as interest paid to partner for purposes of s. 40(b). That is specific case of present assessee and clearly Explanation is attracted with effect that such interest paid to individual where he represents joint family in firm is not to be disallowed under s. 40(b). decision of Andhra Pradesh High Court is only decision of High Court on question whether Expln. to s. 40(b) is classificatory and applies even for assessment years prior to date of amendment. We are, therefore, required to follow that decision and hold that in present case in view of classificatory nature of amendment as held by Andhra Pradesh High Court position even prior to amendment was that interest paid to individual where he represents joint family in firm cannot be disallowed under s, 40(b) and, therefore, order of assessment not making such disallowance was not erroneous or prejudicial to interest of Revenue. It was pointed out that Bench of Tribunal had decided otherwise in case or Rm. Appavu Chettiar. But perusal of that order shows that in that case for earlier assessment year on identical facts such disallowance had been man made and Tribunal observed that since reference had been made to High Court for preceding assessment year it would suit balance of convenience of parties to follow that decision for sub-s. assessment year also and hence no clearer decision was taken to disregard Expln. to s. 40(b) for assessment years prior to amendment. Since correct position in law as held by Andhra Pradesh High Court is to apply Explanation even to assessment year prior to amendment, we must on facts of this case hold that order of CIT disregarding that Explanation was incorrect and cancel it. 6. In result, appeals are allowed. *** ASERA FINANCE CORPORATION v. INCOME TAX OFFICER