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TMI Blog1990 (7) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to reproduce below the relevant portion of the will : " Property owned, and possessed by me and in respect of which this will is made is as follows :---- 1. Property described in para 2 (A) and (b) of the memorandum of partition prepared on 3-12-1956 and in consequence of the same, allotted to me, exclusively and herein described in Schedule (i). 2. Shares of various Joint Stock Companies deposited with the Bank of India Ltd. Bombay (Head Office), Fort, of the approximate value of Rs. 60,000 (sixty thousand), standing in my name and/or in the name of the Bank of India Ltd., Bombay against my overdraft account, with the said Bank. 3. Cash amounts standing to my credit as detailed below : (A) An amount of Rs. 500 approximately standing to my credit in the overdraft account referred to in clause (2) above or such amount as may be standing to my credit in the said amount, at the time of my demise. (B) An amount of Rs. 28,000 (Rupees twenty-eight thousand) approximately standing to my credit in fixed deposit with the aforesaid Bank of India Ltd. (C) An amount of Rs. 60,000 (sixty thousand) approximately standing to my credit in the current account with the Vishnu Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... full power of disposition, either by gift or by will. Rs. 1,00,000 Total Rupees One lakh only. These allotments in (a) to (d) are subject to the provision that in the event of the assets (detailed in paras 1 to 5) available for distribution proving insufficient to meet these allotments in full, these (allotments) will be reduced Pro-Tanto in the same proportion. (e) The reminder, if any, out of the properties described in paras 1 to 5 above, after making allotments as detailed in paras (a) to (d) of para 8 above, shall go my two sons, Chandrakant and Virendrakumar in two equal shares." 5. As the assessee and his brother did not pay the amount to their sisters Shakuntala, Ramila and Kusum as per the will of their father, dispute arose between them and sisters demanded the amounts due to them with accretions. On 26-10-1972 an Agreement was arrived at between the assessee, his brother and his sisters, the relevant portion of which reads as under :--- " (4) Under clause 8 of the said will he deceased inter alia bequeathed a sum of Rs. 40,000 (Rupees forty thousand) to the said Chardrakant, a sum of Rs. 30,000 (Rupees thirty thousand) to the said Shakuntala, Rs. 15,000(Rupee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment years 1971-72 to 1978-79. The Commissioner of Income-tax took action u/s. 263 of the Act, as he was of the view that the assessee was not entitled to deduction of interest from the dividend income earned by him. The said action of the CIT was challenged in the Tribunal and the Tribunal vide its order dated 28-12-1981 in ITA Nos. 2437 to 2444/ Bom/1980 upheld the order of the CIT. 7. The present proccedings arose out of the action of the ITO giving effect to the said order of the CIT made u/s. 263 of the Act. In framing the assessment u/s. 143(3) read with section 263 of the Act, the ITO disallowed the assessee's claim for deduction of interest amounting to Rs. 7,030 in the following manner : " The main point in the assessment is that the assessee claimed deduction amounting to Rs. 7,030 being interest paid to his sisters and the bank. The deduction claimed u/s. 57 of the Income-tax Act, 1961 as stated by the assessee's representative. He also stated that the payments of interest to his sisters, the ' co-legatees ' under the will of his father late Shri Motabhai Desai, was his legal obligation under the ' Indian Succession Act '. To grant the claim of deduction as discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO has mentioned in the order that the assessee has failed to produce any evidence that the interest was paid for the purpose of making or earning such income from other sources. The appellant has not raised any fresh ground which was not raised before the ITO. The ITO has met out all the contentions raised by the assessee in his assessment orders and the ITO's orders are fully covered with the points raised by the assessee. I therefore find no reason to interfere with the order of the ITO disallowing interest paid to his sisters and bank." 9. Being aggrieved by the order of the AAC, the assessee has come up in appeal before the Tribunal. The learned Counsel for the assessee reiterated the submissions, which were made before the IT authorities and strongly urged that they should have accepted the assessee's claim for deduction of interest payment. In this connection, he strongly relied on the decision of the Hon'ble Bombay High Court in the case of CIT v. H.H. Maharani Shri Vijaykuverba Saheb of Morvi [1975] 100 ITR 67. According to the learned Counsel, on almost similar facts obtaining in that case the Hon'ble Bombay High Court was pleased to uphold the order of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. It is quite apparent that the assessee and his brother did not carry out the wish of their father contained in the will, inasmuch as, they had not paid the amounts to their sisters in time as desired by their late father. It is quite apparent that it is only after disbursement of the property as detained in Paras (a) to (d) of para 8 of the will, that the assessee and his brother were to share remainder in equal proportion. Instead of giving the amounts stipulated in the will to their sisters, the assessee and his brother dragged on the situation till their sisters demanded not only the moneys stipulated in the will but also the accretion thereto. It is under these circumstances that an agreement was arrived at on 26-10-1972, whereby the assessee and his brother had agreed to pay something more than what was stipulated in the will by way of compensation of using their (sisters) share in the property left by the deceased. It is under these circumstances that the assessee and his brother were required to pay interest of Rs. 40,000 over the year. Surely, the interest so paid had no connection whatsoever for earning dividend income. I have carefully gone through the decision reporte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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