9911796707
TMI Blog1986 (6) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the assessee under a will. Shivji Nathubhai carried on business in tendu leaves. For the purpose of carrying on this business he created an equitable mortgage in respect of the house property in favour of the United Commercial Bank, Sambalpur on 4-8-1955 for taking a loan of Rs. 2,82,500 for payment of bills and hundis. Shivji Nathubhai expired on 2-3-1964 and the will executed by him was duly probated. For the assessment years 1974-75 to 1976-77, the assessing ITO allowed deduction of the interest payable under this mortgage against the house rent receivable from the house property with the following observation : " Properties received on will already pledged security to United Commercial Bank by the late Shivji Nathubhai against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a mistake apparent from record and as such could not be rectified under section 154 and she set aside the orders of the ITO for the assessment years 1974-75 to 1976-77. However, in respect of the assessments for the other assessment years she agreed with the ITO that the interest claimed by the assessee as annual charge is not allowable under section 24(1)(iv) and dismissed the assessee's appeals. 4. It was argued by the departmental representative that the AAC was not justified in holding that the mistake was not a mistake apparent from the record and is debatable point of law. As such, he argued that the AAC was not justified in setting aside the orders of the ITO passed under section 154. In this connection he cited the decision in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the property is subject to an annual charge, (not being a charge created by the assessee voluntarily or a capital charge), the amount of such charge ;" 6. So it is clear from the said provision that deduction is admissible in respect of normal charge provided it is (i) not a capital charge, and (ii) not created by the assessee voluntarily. It is not the case of either party that in the instant case the charge is a capital charge. As such it, has to be seen whether the interest is a charge created by the assessee and voluntarily. 7. The term ' assessee ' has been defined in section 2(7) of the Act. The definition does not include ' predecessor-in-interest ' of an assessee from whom the assessee receives house property. Admittedly, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orised representatives for the parties and examination of the decisions relied upon by them and of the materials on record, facts and circumstances of the case, we are of the opinion that the annual charge to which the house property is subject was neither created by the assessee nor voluntarily as held by the ITO. It seems to us that the AAC upheld the order of the ITO on a wrong impression. She seems to have been under the impression that under section 24(1)(iv) annual charge should be ' on the income ' arising out of the house property. This is clear from her following observation : " I do not find anywhere it was mentioned in the correspondences made with the bank that the interest due from the appellant was an ' annual charge ' on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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