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TMI Blog1985 (12) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... ue because of a remission of interest of Rs. 1,20,373 given by the assessee's bankers was not brought to tax under the provisions of s. 41(1) of the IT Act, 1961. The non-inclusion of interest under s. 41 (1) was considered by the CIT as resulting in loss or revenue The facts relating to this sum are as under: 2. The assessee alongwith two other concerns, namely. M/s Chetan Swarup Vinod Swarup and M/s Chaten Gupta Co. originally belonged to a family known as Chetan Swarup Gupta. All these three concerns were having their independent business and were allowed certain overdraft facilities by Oriental Bank of Commerce in 1977. As on31st March 1981they owed to the Bank a sum or Rs. 15,40,430. Shri Alok Gupta son of Shri Chetan Gupta appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the borrowers' offer of Rs. 12.00 lacs as full and final settlement of the outstanding of Rs. 15.40 lacs may please be accepted. The borrowers will be asked to make a payment of Rs. 6.00 lacs immediately on signing the agreement. The balance amount of Rs. 6.00 lacs will by paid within 15 days' time." Thus as against the liability of Rs. 15.40 lacs it was settled for Rs. 12 lacs of which Rs. 6 lacs was to be paid immediately and the balance of Rs. 6 lacks was to be paid within 15 days time. The ITO verified from the bank as to how the interest was adjusted by the bank to the assessee account and it was revealed that the bank had charged interest on the over draft facilities availed of by the assessee in the following manner: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 41(2) of the IT Act as explained above and demand and recover whatever additional tax is found due from the assessee." Aggrieved by this order of the CIT, the present appeal is filed. The contention urged on behalf of the assessee was that there was hooting in the resolution dt.12th May 1981passed by the Bank that the remission given by them was towards interest and that too a sum of Rs. 1,20,373 was given by way of rebate out of interest of Rs. 1,28,501. In the absence of any specific remission given by the Bank, it must be construed that the remission given by the bank was only out of capital and not out of interest. In any case there was nothing specific about it in the bank's resolution even though the request was made to the bank t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this connection we wish to refer to an order passed by the Tribunal, Delhi Bench 'B' in the case of Chetan Gupta vs. ITO ITA. No. 456 of 1970-71 which was referred to us and which contained somewhat similar facts and circumstances. There the assessee obtained a cash credit from the Bank of Bikaner and Jaipur Ltd. Delhi. As on12th June 1961a sum of Rs. 4,13,293 was owing to the bank. As the assessee failed to clear the arrears the bank brought a suit for its recovery inCivil CourtinDelhi. The suit was ultimately compromised by the assessee agreeing to pay Rs. 1,25,000 in full and final settlement. This naturally resulted in a remission of Rs. 2,88,293. This sum included a sum of Rs. 31,239 the interest that was allowed to the assessee in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... method of appropriation the general rule of appropriation of money paid by the debtor to the creditor would apply and under the rule the amount paid should first be appropriated towards interest. Such being the case there is no question of remission of interest at all. This view later followed by Delhi Bench D in the case of the same assessee for the asst. yr. 1968-69 vide ITA No. 309 of 1973-74. The discussion on this point would be found in paragraph 10 at page 63 of the paper book. This rule of appropriation has also been approved off by the Supreme Court in the case of Meghraj Others vs. Mst. Dayabai and Others AIR 1970 SC 161. The Supreme Court held that under Order 21 r. 1 of CPS 1908 in the case of payment of decretal amount by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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