1987 (9) TMI 18 - HC - Income Tax

Summary

Issues Involved:
1. Entitlement to statutory deduction u/s 23(2) of the Income-tax Act, 1961.
2. Deduction of interest claim against interest income.

Summary:

Issue 1: Entitlement to Statutory Deduction u/s 23(2) of the Income-tax Act, 1961
The assessee, a married lady, claimed that her property, occupied by her cousin rent-free, should be considered as self-occupied, entitling her to a statutory deduction of Rs. 1,800 u/s 23(2) of the Income-tax Act, 1961. The court held that for the benefit of section 23(2), the property must be in the occupation of the owner for her own residence. Since the property was occupied by her cousin, the assessee was not using it for her own residence. The court referenced CIT v. Rani Kaniz Abid, where the deduction was allowed due to occasional personal use by the owner, which was not the case here. Consequently, the court concluded that the assessee was not entitled to the deduction of Rs. 1,800, answering the question in favor of the Revenue and against the assessee.

Issue 2: Deduction of Interest Claim Against Interest Income
The assessee maintained three accounts with M/s. Swastic Textile Distributors and claimed a deduction of Rs. 12,280 out of the interest income of Rs. 13,174 received during the year. The Tribunal allowed only Rs. 1,070, disallowing Rs. 11,210. The court noted that the assessee was liable to pay interest of Rs. 23,827 but received interest of Rs. 5,102.36 in other accounts. The court held that the assessee could not be both a debtor and a creditor simultaneously and should be allowed to set off the interest received against the interest paid, thus allowing the deduction of Rs. 5,102.36. However, the court disallowed the interest paid to her minor children (Rs. 1,691) due to lack of nexus between the borrowed money and the income received, affirming the Tribunal's decision except for Rs. 5,102.36.

Conclusion:
The court answered the first question in the affirmative, favoring the Revenue. For the second question, the court partially allowed the reference, permitting the deduction of Rs. 5,102.36 but disallowing the remaining interest claim. There was no order as to costs.