Patna High Court
Raja Bahadur Dhakeswar Prasad Narayan ... vs The Commissioner Of Income-Tax, Bihar ... on 3 January, 1939
Equivalent citations: [1939]7ITR260(PATNA)
JUDGMENT
WORT, J. - This is an application by Raja Bahadur Dhakeshwar Prasad Narayan Singh for leave to appeal to his Majesty in Council from a judgment of this Court on a case stated by the Commissioner of Income-tax under Section 66 clause (2) of the Income-tax Act. The question which arose was as to the proper deductions to be made for the purpose of ascertaining the assessable income of the assessees, and in these circumstances. It appears from the facts stated by the Commissioner that the assessee purchased from the Maharajadhiraja of Darbhanga a decree for a sum of upwards of Rs. 33,00,000, the consideration of which was partly paid by the execution of a hand-note for Rs. 1,04,936 and also by a zarpeshgi transaction valued at about Rs. 30,50,000. The period of the zarpeshgi was seventeen years and at the time of entering into the transaction the parties prepared an account by which periodical (quarterly) amounts of interest were fixed, which were set off against what was ascertained to be the annual value of the property, the balance being set off against the principal sum from time to time : and by the account it appeared, as I have already indicated, that in a period of seventeen years both the interest and the capital would be liquidated. It appears that the decree which was purchased by the assessee was not executed; but the reason for that does not appear from the record of the case, and we are in no way concerned with it. The contention of the assessee before this Court was that the quarterly sums, which were entered in the account of which I have spoken, being interest to the amount of Rs. 45,750, were sums which were expended by the assessee for purchasing the income which was derived from the decree, that is to say the interest which the decree bore, so long as it was not executed by the assignee of the decree, namely the assessee in this case. I do not propose to restate the reasoning of the judgment in this case, to which I was a party; but it seems to me that the matter is summed up in one observation which was to this effect :-
"The fallacy (that is the fallacy of the argument presented to the Court) lies in the statement that the zarpeshgi lease was for the purchase of this income. In point of fact the purchase was not for the income of the decree but the purchase of the decree itself."
It is contended by Mr. Manuk that the case came under either clause (iii) of sub-section (2) of Section 10 being capital borrowed for the purposes of the business or sub-clause (ix) of the same section, any expenditure (not being in the nature of capital expenditure) incurred solely for the purpose of earning such profits or gains, or sub-section (2) of Section 12, such income, profits and gains shall be computed after making allowance for any expenditure incurred solely for the purpose of making or earning such income, profits or gains. The point, which we have to consider is whether there was a substantial question of law. Therefore, the merits of the judgment with regard to which this application is made, do not enter into the matter. But clearly the case does not come under Section 10, as Section 10 relates to a business carried on by an assessee, and it is not suggested that this transaction was in any way connected with the business of this assessee. The same may be said of clause (ix) of the same section, as it refers to the same matter. As regards Section 12, whatever else may be said with regard to the point, it cannot be contended that the notional payment of interest as shown by the account was an expenditure solely for the purpose of making or earning such income. As I have already stated, if the notional payment of interest can be considered to be a payment by the assessee, at the very most it could be said that it was a payment party for purchasing the interest on the decree so long as it was not executed and partly for the decree itself. But in my judgment it was solely for the purchase of the decree and although it may be said here that this is not purely a question of fact, it does not follow that it becomes a substantial question of law within the meaning of Section 110 of the Code of Civil Procedure.
I would reject the application and therefore refuse to grant the certificate to appeal to His Majesty in Council with costs : hearing fee five gold mohurs.
HARRIES, C.J. - I entirely agree.
Application rejected.