Law:

Section:

Income tax--- Income-Diversion by overriding title-Assessee inheriting assets and liabilities on his father's death-Overdraft from bank taken by assessee's father for paying his tax liabilities-Interest on overdraft paid by assessee-Represents amounts which were diverted for meeting claims of secured creditor, viz., bank, on account of overriding title inheriting in favour of secured creditor-Interest amount does not form part of real income of assessee-Assessee, held, entitled to deduction of interest payments. Udayan Chinubhai v. C. I. T. (1978) 111 I T R 584 (Guj.) fol. Bejoy Singh Dudhuria (Raja) v. C. I. T. (1933) 1 I T R 135 (P C) ; C. I. T. v. Indumati Ratanlal (Smt.) (1968) 70 I T R 353 (Guj.) ; C. I. T. v. Purshottamdas Thakurdas (1946) 14 I. T. R. 305 (Bom) ; C. I. T. v. Sitaldas Tirathads (1961) 41 I T R 367 (S C) ; Dalmia (R.) (Seth) v. C. I. T. (1977) 110 I T R 644 (S C) ; Mullick (P. C.) v. C. I. T. (1938) 6 I T R 206 (P C) ; Ormerods (Ind.) P. Ltd. v. C. I. T. (1959) 36 I T R 329 (Bom.) ; Padmavall Jaykrishn v. C. I. T. (1975) 101 I T R 153 (Guj.) and Venugopala Varma Rajah v. Commr. of Agri. 1. T. (1972) 84 I T R 466 (S C) ref. JUDGMENT MAJMUDAR, J.-In this reference, the Income-tax Appellate Tribunal, Ahmedabad, Bench 'B' has referred for our opinion a question of law under section 256(1) of the I. T. Act, 1961, at the instance of the assessee. The question runs as under : "Whether, on the facts of the case, the Tribunal was right in law in holding that the assessee was not entitled to deduction of the interest payments of Rs. 20,435, Rs. 54,632, Rs. 50,025 and Rs. 5,497 for the assessment years 1966-67 to 1969-70, respectively?" In order to appreciate the background of the controversy between the parties which has given rise to the aforesaid reference, it is necessary to have a look at certain relevant facts. The assessee's father expired somewhere in July, 1965. On his death, the assessee inherited assets worth Rs. 12,38,000 and liabilities worth Rs. 2.47,000 in respect of the borrowing from the Bank of India by the assessee's father. The Bank liabilities represented overdraft taken by the assessee's father for the purpose of paying his tax…

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