TMI Blog2007 (3) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... MENT The judgment of the court was delivered by MRS. CHITRA VENKATARAMAN J.— 1. T. C. No. 14 of 2004 relates the assessment year 1995-96. T. C. Nos. 1094 to 1096 of 2004 relates to the assessment years 1998-99, 1999-2000 and 2000-01. All these appeals are at the instance of the Revenue. The facts are common in all the cases. The question of law raised is also the same, which is as follows: "Whether, on the facts and circumstances of the case, the Tribunal was right in allowing interest neither contracted to be paid to the trust, nor claimed in the return, as a deduction from income from house property ?" 2. For convenience, the facts in T. C. No. 14 of 2004 are referred to here. 3. The assessee is a private company. The pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he trust directly by reason of overriding title, since the company desired to provide for interest/compensation for the money provided by the trust. Accordingly, the rental income relating to the company is appropriated directly by the trust from the assessment year 1993-94 onwards. It further stated for all practical purposes, the trust owned the company. Hence, the assessee stated that there was no taxable income in the hands of the assessee for the year 1995-96 and hence it filed a nil return. Consequently, it pleaded that the inclusion was unsustainable. 5. Noting the memorandum of understanding and the contentions raised, the assessing authority noted that it was strange that the understanding arrived at on April 1, 1992, was reduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, it should be permitted to claim deduction in terms of the proviso to section 24(1) (iv). Hence, as an alternative plea, the assessee claimed that an interest payment at 18 per cent. should be considered for deduction. The Commissioner of Income-tax (Appeals) noted that in the initial assessment years the assessee-company admitted income from house property. The appellate authority held that the question of diversion of income by overriding title was not there at all at the time the advance was made to the company, that the obligations arose due to the directors of the company being managing trustees of the trust. In the circumstances, the appellate authority agreed with the Assessing Officer that the assessee-company was not obliged to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by overriding title since there was no overriding interest for the trust in those properties. However, the Tribunal held that since no interest was created in favour of the educational trust, the assessee was liable to pay interest for the sum advanced by the trust. Consequently, it held that the first appellate authority had rightly allowed the alternative plea of the assessee by granting interest at 18 per cent. on the advance made by the educational trust. The Tribunal held that it was not the case of anybody that the amount was advanced free of obligations or by way of gift and hence, if the rental income could not be allowed as claimed by the assessee, then the trust would be entitled to an interest. Hence, accepting the claim for pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anding did not specify any interest return. She submitted that the authorities below erred in noting the fact that the claim for payment of interest at 18 per cent. itself was made only in the proceedings before the first appellate authority. The payment of interest was never in contemplation when the trust advanced money. In the circumstances, the authorities below over stepped in granting the relief to the assessee. 13. It is no doubt true that the assessee made its alternative plea for the payment of interest at 18 per cent. first time before the appellate authority. However, taking note of the memorandum of understanding and considering the fact that the question of diversion of income by overriding title as rejected, this plea was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rental income. In the circumstances, the grant of interest at 18 per cent. or restricting it at 18 per cent. by the Tribunal, is an act not contemplated either in the time when the trust advanced the money or even when the assessee made an alternative plea before the first appellate authority. In the above circumstances, an unilateral offer by the assessee to have a return at 18 per cent. is totally uncalled for and not supported by any consensus between the trust and the assessee. But, at the same time, the memorandum of understanding stands as regards the contemplation on the return of the investment made. However, the order of the Tribunal confirming the Commissioner (Appeals) order as regards the return on investment made is sustai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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