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Issues:
1. Deductibility of interest paid to M/s. J. K. Woollen Manufacturers Ltd. 2. Allowability of Bhumi and Bhavan Kar as a deduction for the assessment year 1969-70. Analysis: The judgment delivered by the High Court of ALLAHABAD addresses two questions referred by the Tribunal under section 256(2) of the Income-tax Act, 1961. The first issue pertains to the deductibility of interest paid by the owner of a property on a mortgage executed in respect of that property under section 24 of the Act for the assessment years 1969-70, 1970-71, and 1971-72. The court examined the relevant clauses (iii) and (iv) of sub-section (1) of section 24 as amended by the Finance Act, 1968. It was concluded that interest paid on a voluntary mortgage is not deductible under clause (iv) of the Act. The court emphasized that a mortgage created for business purposes, even if in the interest of the business, is still considered a voluntary transaction. Therefore, the court answered the first question in the negative, favoring the Revenue and against the assessee. Moving on to the second issue, the court considered the deductibility of Bhumi and Bhavan Kar tax paid by the property owner for the assessment year 1969-70. The Tribunal had held that the tax was levied and paid by the assessee-owner, making it deductible under clause (vii) of sub-section (1) of section 24. The court noted that the property was vacant during the relevant years, yet the tax was imposed and paid by the owner. As there was no evidence to suggest the tax levy was illegal, and it was confirmed that the tax was indeed paid by the assessee, the court answered the second question in the affirmative, favoring the assessee and against the Revenue. In conclusion, the High Court of ALLAHABAD ruled against the deductibility of interest paid on a voluntary mortgage but in favor of allowing the deduction for Bhumi and Bhavan Kar tax paid by the property owner, based on the circumstances and provisions of the Income-tax Act, 1961.
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