Commissioner of Income Tax vs Raghubir Saran

The Income Tax Appellate Tribunal, Delhi has referred ''he following question of law u/s 256(1) of the Income Tax Act, hereinafter referred to as the Act, for opinion of this Court:-

"Whether on the facts and in the circumstances of the case, the learned Tribunal was legally correct in holding that no annual charge was created by the assessee voluntarily on the property and, therefore, the assessee''s claim of deduction of Rs. 27,984 from the property income could not be disallowed under the provisions of section 24(1) of the Income Tax Act ?"

The reference relates to the assessment year 1979-80. The respondent, who is an individual derives income from business, plying of bus and from property. During the assessment year 1979-80, he claimed deduction of Rs. 27,984 towards interest paid to Smt. Dayawati, Smt. Bina Singhal and Vipin Kumar in respect of the amount borrowed for the property in question. The Income Tax Officer has disallowed the amount on the ground that it was the charge created voluntarily, and therefore, not allowable u/s 24(1)(iv) of the Act. In the appeal filed by the assessee, the Appellate Assistant Commissioner directed the amount of Rs. 27,984 to be allowed as deduction. The revenue''s appeal before the Tribunal has failed.

We have heard Shri A.N. Mahajan, learned counsel for the revenue and Shri Vikram Gulati, learned counsel for the respondent. Shri A.N. Mahajan, learned counsel for the revenue very fairly stated that the controversy raised in the present reference is clearly covered by the decision of this court in the case of the CIT v. Raghubeer Saran (1999) U.P. Tax Cas 41 , which is inter parties and related to the earlier years. The amount of interest is allowable u/s 24(1)(vi) of the Act.

Respectfully agreeing with the question of law, we answer the question of law in the affirmative, i.e., in favour of the assessee and against the revenue. However, there shall be no order as to costs.