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TMI Blog1981 (11) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... und was that in the hands of the assessee-HUF the character of the liability is not that of income-tax payable but a liability like any other liability. The second ground was that the assessee has been given instalments, facility for the payment of these taxes, that the assessee had been keeping up the payment of such instalments without default and, therefore, it cannot be said that these amounts were outstanding for more than twelve months as envisaged under section 2(m)(iii)(b). The AAC agreed with the assessee that these amounts cannot be considered to be income-tax liabilities to which the provisions of section 2(m)(iii) would apply as they were the income-tax liabilities of late Kumaraswamy Reddiar. He considered that it was unnecessary to go into the question whether the amounts as tax were outstanding for more than twelve months. He held that these liabilities should be allowed as a deduction. In doing this, he referred to the order of the Income-tax Appellate Tribunal, Cochin Bench, dated 3-5-1978, in IT Appeal No. 67 (Coch.) of 1977-78 in the case of the assessee itself for the assessment year 1974-75. The revenue is in appeal against this order of the AAC. 3. It is cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olved upon the assessee-HUF. It would appear that this particular part of the settlement term has not so far been put through. The payments have been made in the instalments which were fixed at the time of settlement at certain figures but which were subsequently modified at the request of the assessee here from time to time. It is the balance amounts that were so outstanding that were claimed as deductions by the assessee here. 5. The assessee under appeal is a HUF of which Radhakrishna Reddiar is the karta. The HUF consisting of Radhakrishna Reddiar and Muthukrishna Reddiar, that came into being on the death of Kumaraswamy Reddiar, got partitioned on 12-3-1972. Under this partition, Radhakrishna Reddiar took over the cloth business (which was run by Kumaraswamy Reddiar originally) and also the income-tax liability. The settlement with the department took place on 2-2-1972. 6. On the instalments that were allowed to be paid by the assessee in respect of the tax liability of Kumaraswamy Reddiar for the assessment years 1957-58 to 1963-64, the ITO levied interest under section 220(2). For the assessment year 1974-75, the assessee had claimed a deduction of the interest in the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be allowed as a deduction in view of the circumstances of the case, namely, the take over of the liability by the assessee. It is submitted that the Tribunal's order has not converted this liability into a non-income-tax liability. 8. On the question whether these amounts could be considered to be outstanding on the valuation dates, it is urged that the word "outstanding" appearing in section 2(m)(iii) should be given its natural meaning of its describing merely an obligation without the further overtone of its being an obligation due in point of time on the valuation date. It is pointed out that in spite of the granting of instalments, the amounts should be considered to be outstanding on the valuation dates and if the assessee commits a default in any instalment the whole amount would become due immediately as provided in section 220(5) of the Income-tax Act. 9. On behalf of the assessee, it is urged that the Tribunal has held these amounts as not income-tax liability. This according to the assessee would conclude this facet of the case. It is urged that the liability does not relate to the assessee and, therefore, even the provisions of section 40(a)(iia) would not apply t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... father. We do not think that this order of the Tribunal can be extended to hold that these sums for the two assessment years do not represent the category of liability considered under section 2(m)(iii), namely, the amount of tax, penalty or interest payable in consequence of any order passed under or in pursuance of any law relating to the levy of what is generally described as the direct taxes. This included income-tax, wealth-tax, gift-tax, expenditure tax and estate duty. On behalf of the assessee, the provisions of item (a) of sub-clause (iii) of clause (m) has been pointed out. This particular item refers to an item outstanding on the valuation date claimed by an assessee in appeal/revision or other proceedings as was not paid by him. It is seen from the papers submitted by the assessee before us that the settlement was evidenced by an agreement which has been entered into by the karta of the HUF as the legal heir of late Kumaraswamy Reddiar. Since Radhakrishna Reddiar is the legal heir of the deceased Kumaraswamy Reddiar, the assessments in respect of these assessment years would have been made on Radhakrishna Reddiar even if no settlement has been reached and Radhakrishna ..... X X X X Extracts X X X X X X X X Extracts X X X X
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