1973 (3) TMI 2

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..... ion of law arising for decision is whether the assessee was entitled to claim deduction of compound interest under section 9(1)(iv) of the Indian Income-tax Act, 1922. The High Court answered that question in the negative and in favour of the department. Aggrieved by that decision, the assessee has come up in appeal to this court. To decide the question set out above, it will be sufficient if we refer to the facts relating to one of the assessment years, i.e., 1956-57. The material facts are as follows : The assessee is a trustee of a house property at Chandmari Road, Howrah. In respect of that house there was a title suit filed by one Durga Prasad Chamria against Smt. Anardeyi and others claiming title over that property and for other .....

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..... the case, and on a true construction of the words 'interest payable on such capital' in section 9(1)(iv) of the Indian Income-tax Act, 1922, the amount of interest allowable was Rs. 18,000 or Rs. 38,221 ? " The questions referred for the remaining assessment years are more or less similar. The High Court answered those questions, as mentioned earlier, in favour of the department. Herein we are called upon to consider the true scope of section 9(1)(iv) of the Indian Income-tax Act, 1922. The relevant portion of that section reads thus : " (1) The tax shall be payable by an assessee under the head 'Income from property' in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto of which .....

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..... st payable is not paid, the same became a part of the principal and, thereafter, interest has to be paid not only on the original principal but also on that part of the interest which had become a part of the principal. It cannot be said that the interest which became a part of the principal can be considered as the capital charge. What the assessee is entitled to deduct is the interest payable by him on the capital charge and not the additional interest which because of his failure to pay the interest on the due date had been considered as a part of the loan. In fact, the real capital charge is that which was originally due. The other portion is merely an interest on which the assessee has agreed to pay interest. Hence we are unable to acc .....

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