COMMISSIONER OF INCOME TAX Vs. TARACHAND KALYANJI

JUDGEMENT

(1.) THE assessment year involved is 1969 70. The assessee carried on business as a building contractor. It had constructed more than 17 buildings for the Government and other authorities. In the year 1950 it was assessed to tax under the Excess Profit Tax Act and a tax of Rs. 25 lakhs was demanded from them in 1950. The assessee mortgaged certain immovable property on 12th Aug., 1955 for Rs. 5 lakhs. Under the terms of the mortgage, compound interest at the rate of 6 3/4% was payable on the mortgage loan. A charge was also created on the property for the payment of compound interest. This loan of Rs. 5 lakhs was raised for meeting the excess profit tax liability.

(2.) SIMILARLY , on 16th May, 1962 the assessee created an equitable mortgage on his Ghatkopar property for securing a loan of Rs. 1,50,000. A charge was also created on this property for the payment of interest. This loan was also raised for discharging the above excess profit tax liability.

(3.) FROM the decision of the Tribunal, the following question is referred to us under S. 256(1) of the IT Act at the instance of the Revenue :