COMMISSIONER OF INCOME-TAX Vs. CHOWRINGHEE PROPERTIES LIMITED

JUDGEMENT

(1.) THIS is an appeal by the Commissioner of Income-tax, Bengal, from a judgment and decree of the High Court of Judicature at Bengal, the matter corning before the High Court on a reference under Section 66 (1) of the Indian Income-tax Act, 1922 (as amended), made by the Income-tax Appellate Tribunal, Calcutta Bench.

(2.) THE question at issue is whether it was rightly decided by the High Court that the respondent company on an assessment under that Act to tax on its income from buildings was entitled to an allowance in respect of interest payable under certain debentures issued by it to the Allahabad Bank. THE facts are simple, the relevant statutory provision is free from ambiguity, and the point is short. Exceptionally the nut is not scattered on emerging from its shell.

(3.) IN the relevant year 1938/1939 the company, while paying interest on its overdraft, paid no interest on the debentures held by the bank. The company's claim is that the interest on the debentures is deductible. Its contention was as follows, The buildings were under the debentures mortgaged to secure a capital charge (i. e. , the debenture debt): the sum sought to be deducted was therefore interest on a mortgage: and in the light of Behari Lal Mullick, IN re (1927) I. L. R. 54 Cal. 630 a interest payable, though not paid, was interest within the meaning of the quoted provision. The result was obvious. This contention failed before the INcome-tax Officer but found favour with the Appellate Assistant Commissioner, the INcome Tax Appellate Tribunal, Calcutta Bench, and the High Court. The contention of the appellant the Commissioner of INcome-tax is just as simple. The debentures were and remained, subject to the charge, an asset of the company. That asset consisted of a bundle of rights against the company in the hands of the bank. The right to receive interest is one of those rights. One does not owe or pay interest to one's self.