1981 (4) TMI 115

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..... e-tax Act, 1961 ("the Act"), for recovery of arrears of income-tax as certified by the ITO and interest payable thereon for the period commencing after the date of the certificate. The case of the assessee before the ITO was that the order of attachment issued by the TRO created an annual charge, not being a capital charge, in respect of the interest payable by the assessee referred to above and so the said interest should be allowed as a deduction under section 24(1)(iv) of the Act while computing the income of the said property. The ITO rejected the contention as not acceptable but did not specify any reasons therefor. 2. The assessee appealed to the AAC and contended that its claim should have been allowed. The AAC observed that the att .....

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..... ideration might be calculated and allowed under section 24(1)(iv). 4. Shri T.S. Srinivasan, the learned representative for the department, on the other hand, supported the order of the AAC. He urged that the order of attachment by the TRO was merely a prohibitory order restraining the assessee from disposing of or otherwise encumbering the house property and it did not create any charge on the same. According to him, the attachment order gave the right to the TRO to sell the house property and apply the sale proceeds towards the tax arrears as well as the interest thereon from the date of the certificate to the date of recovery. In other words, the attachment order did not operate as an order creating a charge on the property for paying an .....

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..... e by the attached property. A charge on an immovable property is created for security of a debt or a recurring liability. The interest for the subsequent period, referred to above, may or may not arise, depending upon whether the assessee paid the tax arrears before the property was sold or whether the property was sold sooner or later. The liability to pay interest for the subsequent year will not arise unless and until the default in paying the tax arrears was made by the assessee and in such a case, there cannot be said to be any charge on the property, vide the decision in the case of Metro Theatres Bombay Ltd. v. CIT [1946] 14 ITR 638 (Bom.). Further, there must be an existing charge as was held in the case of Sri Bhagwan Radha Krishan .....

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