PURABI GUHA Vs. INCOME-TAX OFFICER

JUDGEMENT

(1.) These two appeals are taken together and disposed of by a common order.

(2.) The assessee is in appeal against the order passed by the Commissioner under section 263 of the Income-tax Act, 1961 (the Act). The assessee is an individual. The assessee was having an immovable property at 23A/198A, Block J, Alipore. There was a charge on this property in favour of several persons. The assessee made an arrangement with West Bengal Industrial Development Corpn. Ltd. for the advance of money. On 11-3-1968 the Corporation agreed to lend the money and a sum of Rs. 3,18,000 was granted to the assessee for her utilisation in the following manner :

(3.) The assessee before the Commissioner urged that the deduction allowed for interest by the ITO under section 24(1) (iv) of the Act was fair. The assessee urged that the loan was taken from the Corporation for renewing the property and, therefore, the interest was allowable under section 24(1) (vi). The assessee also supported the order of the ITO that the ITO was justified in allowing deduction for municipal tax. The Commissioner was not satisfied with the explanation of the assessee. He discussed the agreement of the assessee with the Corporation and he found that the assessee took only loan of Rs. 8,68,000 and a sum of Rs. 50,000 was spent utmost on the renewal of the property and, hence, the assessee should not have been allowed deduction for more than Rs. 5,000. He also relying on Shew Kissen Bhatter v. CIT, 1973 89 ITR 61 stated that the ITO should not have allowed interest on interest. The Commissioner further observed that according to the terms of the lease agreement the assessee had no liability to pay the owners and occupiers share of tax and, consequently, the deduction allowed by the ITO was incorrect. While passing this order, the Commissioner further observed that the ITO should also examine whether the lease rent from the Beliaghata Road property should be assessed as income from other sources or as income from house property. Consequently, he set aside both the assessments and directed the ITO to redo the same after examining the facts of the case in the light of the observation made by him after allowing an opportunity of being heard to the assessee.