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TMI Blog1969 (1) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... December, 1955. The assessee is the trustee to the estate of Smt. Anardeyi Sethani. A title suit being Suit No. 61 of 1923 was filed by one Durga Prosad Chamaria against Smt. Anardeyi Sethani and others claiming title over certain properties including the property at Chandmari Road, Howrah. A consent decree was passed on the 19th April, 1928. Under the terms of the said decree it was provided that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion worked out to be Rs. 18,000. The assessee, however, claimed that he was entitled to a deduction of Rs. 38,221 on the basis of the calculation of the total interest payable on the total outstanding comprising of the principal and the compound interest. The Income-tax Officer disallowed the claim of the assessee and only allowed the claim to the extent of Rs. 18,000 against income from the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on: " Whether, on the facts and in the circumstances of the case, and on a true construction of the words 'interest payable on such capital' under section 9(1)(iv) of the Indian Income-tax Act, 1922, the amount of interest allowable was Rs. 18,000 or Rs. 38,221 ? " In our opinion, for the purpose of answering this question it is important to bear in mind that what' is allowed is interest on " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led an assessee from entering into an agreement whereby the assessee became liable to pay compound interest. He further urged that compound interest also retained the character of interest. He drew our attention to the decision of the House of Lords in the case of Inland Revenue Commissioners v. Oswald. He referred us to the observations of Lord Thankerton at page 43 of the said judgment where his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l interest on such original capital or is it interest on something else? If it is interest on something else then in our opinion it does not come within the provision for allowance under clause (iv) of section 9(1) of the said Act. It is clear that in this case what has happened is that the remaining unpaid portion of interest has been capitalized and what is being claimed is interest on that. So, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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