1983 (11) TMI 96 - AT - Income Tax

Summary

Issues:
1. Treatment of income from Shree Madhu Industrial Estate (P) Ltd.
2. Disallowance of interest paid under sections 220(2) & 217(1A) to the Government of India.
3. Disallowance of interest paid to M/s Textile Processing Corporation.

Analysis:
1. The first issue pertains to the treatment of income from Shree Madhu Industrial Estate (P) Ltd. The assessee claimed that the rent/licence fee should be treated as income from house property, while the ITO treated it as income from an undisclosed source. The AAC confirmed the assessment as income from other sources, stating that only legal owners could be assessed for income from house property. The Special Bench's decision in a similar case emphasized that ownership for income from house property should be determined practically, considering the rights and control over the property. The Tribunal agreed with the Special Bench's decision, holding that the assessee could be treated as an owner of the house property, directing the ITO to modify the assessment accordingly.

2. The second issue concerns the disallowance of interest paid under sections 220(2) & 217(1A) to the Government of India. The AAC disallowed the claim under section 80V, stating that the provision aims to induce taxpayers to pay taxes promptly, not to encourage delayed payments. The assessee argued that interest paid for delayed tax payment should be allowed as a deduction. The Tribunal agreed with the assessee, stating that there is no material difference between tax due under the IT Act and the Voluntary Disclosure Scheme. It held that the assessee is entitled to deduction for interest paid for delayed tax under the Voluntary Disclosure Scheme.

3. The final issue involves the disallowance of interest paid to M/s Textile Processing Corporation. The ITO rejected the claim as the amount pertained to the previous year's liability, and the AAC confirmed the disallowance. The Tribunal upheld the disallowance, stating that no material was presented to contradict the findings of the ITO and the AAC. Consequently, the appeal was partly allowed, affirming the disallowance of interest paid to M/s Textile Processing Corporation.