TMI Blog1992 (10) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... deceased, leading to the demand for the payment of estate duty. For paying the estate duty, the assessee raised an overdraft with the bank on the security of the house property by creating a charge on it for the repayment of the loan as well as interest. On the loan so borrowed, interest became payable for the assessment years 1969-70, 1970-71 and 1971-72 amounting to Rs. 39,741, Rs. 33,473 and Rs. 34,000, respectively. The assessee, in its assessment for these three years, claimed deduction of these amounts from the income for the house property under section 24(1)(iv) of the Income-tax Act, 1961. The Tribunal has allowed this deduction. Hence, the following question of law is referred to us at the instance of the Revenue under section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tarily ? The word "voluntarily" is normally used in contradistinction to the word "involuntarily". "Involuntarily" implies being compelled to do something. Therefore, a charge which is created, for example, by operation of law or by a decree of a court cannot be considered as a charge created either by the assessee or created voluntarily. Similarly, where the property in the possession of the assessee is already subject to a charge, the assessee cannot be said to have created such a charge voluntarily. In the case of Clive Buildings (Calcutta) Ltd. v. CIT [1989] 175 ITR 515, the Calcutta High Court was required to consider the same provision under the Income-tax Act, 1961. Analysing section 24(1)(iv), the Calcutta High Court said that an an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve used the words "by act of parties ", which is the expression generally understood as the opposite of the words "by operation of law". Here the expression used is voluntarily", which must be understood as distinct from, and as opposed to, the expression "involuntarily". The word "involuntarily" means "without there being any option" that is to say, under an enforceable obligation. Therefore, where a person creates an annual charge to meet an existing, genuine, legal or contractual obligation, it would not be a case of creating a charge voluntarily. The Andhra Pradesh High Court appears to have taken the view that a charge to be voluntary, must be without compulsion. But what is compulsion ? If a charge is created by force or undue influ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, Sixth edition, at page 1575. The term "voluntary" is defined as "unconstrained by interference ; unimpelled by another's influence .... Resulting from free choice, without compulsion or solicitation. . Without valuable consideration ; gratuitous, as a voluntary conveyance". He submits that the term "voluntary" in the context of section 24(1)(iv) should be interpreted as "without valuable consideration". If a charge is created without valuable consideration, it should be treated as a voluntary charge. But then, what is a charge without consideration ? A charge is created to secure payment of money which the creator of the charge is under a legal obligation to repay. Section 100 of the Transfer of Property Act, 1882, which defines a charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by the assessee or (2) which is not created by the assessee voluntarily in the sense that it is created or thrust upon the assessee either by operation of law or by a decree of a court or by the act of his predecessor in title or by reason of the property coming into his hands with an existing or overriding charge will have to be treated as an involuntary charge for the purpose of section 24(1)(iv). In this context, we may usefully refer briefly to the history of section 24(1)(iv). The section in the present form has been introduced with effect from April 1, 1962, by the Income-tax Act, 1961. Section 24(iii) provided a deduction in the following terms: "24. (iii) where the property is subject to a mortgage or other capital charge, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be a valid and legally enforceable charge and not also that it should be a compulsory charge. It is true that, in the above case, the Bombay High Court did make some observations as to whether the charge in that case which was create to secure an annual payment to the mother of the assessee was to be considered as a voluntary charge. But it ultimately decided the question on the language of the section as it then stood. The discussion contained in these and similar decisions relating to voluntary charges may have been the background in which section 24(1)(iv) was amended to add the words "not being a charge created by the assessee voluntarily". The language of section 24(1)(iv) incorporates the concept of a charge being voluntarily ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
