Allahabad High Court
Commissioner Of Income-Tax vs Smt. Indramani Devi Singhania on 10 January, 1991
Equivalent citations: [1991]189ITR124(ALL)
Author: B. P. Jeevan Reddy
Bench: B.P. Jeevan Reddy
JUDGMENT B. P. Jeevan Reddy, C.J.
1. Following two questions have been referred by the Tribunal under Section 256(2) of the Income-tax Act, 1961, for our opinion :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in allowing the claim of the assesses in respect of interest paid to M/s. J. K. Woollen Manufacturers Ltd. ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Bhumi and Bhavan Kar amounting to Rs. 5,618 was an allowable deduction for the assessment year 1969-70 ?"
2. We shall state the relevant facts in each question separately. So far as question No. 1 is concerned, the question is whether the interest paid by the owner of a property on the mortgage executed by him in respect of that property is deductible under Clause (iv) of Sub-section (1) of Section 24 of the Act. The assessment years concerned herein are 1969-70, 1970-71 and 1971-72. By the Finance Act, 1968, Clause (iii) of Sub-section (1) of Section 24 of the Act was deleted and certain words were inserted in Clause (iv). For the sake of convenience, we may read both Clause (iii) as well as Clause (iv) as amended by the said Finance Act. Clause (iii) reads ;
"(iii) where the property is subject to a mortgage or other capital charge, the amount of any interest on such mortgage or charge.
(iv) where the property is subject to an annual charge (not being a charge created by the assessee voluntarily or a capital charge), the amount of such charge."
3. It is evident from a reading of these two clauses that Clause (iii) which permitted any amount paid by way of interest on a mortgage or other capital charge was deleted and Clause (iv) was amended in such a manner as to make only that annual charge which is not voluntary or which does not amount to a capital charge alone deductible. Even if we agree that the expression "annual charge" includes mortgage--we, of course, do not wish to express any final opinion on this aspect--the interest paid on such mortgage would not be deductible for the simple reason that the mortgage was not involuntary. So long as the mortgage is voluntary, the interest paid thereon is not deductible under Clause (iv). (We may clarify here that no claim has been made under Clause (vi) of Sub-section (1) of Section 24 and, therefore, we need not deal with that clause).
4. The Tribunal has expressed the view that the mortgage concerned herein cannot be said to be voluntary because "it had to be created absolutely in the interest of the business when it was being carried on." We are afraid that even a mortgage created for such purpose cannot be called an involuntary transaction. It would still be a voluntary transaction. No one mortgages his property except when he is in need--of whatever kind ; on that account, it cannot be said to be an involuntary transaction. For the above reasons, we answer the first question in the negative, i.e., in favour of the Revenue and against the assessee.
5. So far as the second question is concerned, we are inclined to answer it in the affirmative, i.e., in favour of the assessee. It relates to deducibility of the tax paid by the owner of the house called Bhumi and Bhavan Kar. The order of the Tribunal no doubt states that the said tax is a charge upon the tenants but, at the same time, it also states that, for the years in question, the house was lying vacant and yet the tax was levied and paid by the assessee owner. If so, the Tribunal was right in holding that the said tax is deductible under Clause (vii) of Sub-section (1) of Section 24. It is not established before us that the levy of the tax was illegal. It is also admitted that the tax was indeed paid by the assessee.
6. Accordingly, question No. 2 is answered in the affirmative, i.e., in favour of the assessee and against the Revenue.