Law:

Section:

Section 24(1)(iv) of the income-tax act, 1961-Income from house property-Deductions- Under pressure from its creditors from whom assessee had taken loans for construction of certain house properties, assessee created mortgages in respect of these properties to pay off creditors and paid interest under such mortgages-whether, since these mortgages were created under pressure of creditors, they were not 'voluntary' within the meaning of section 24(1)(iv) and, therefore, assessee was entitled to deduction of interest paid under such mortgages under section 24(1)(iv)-held, yes Words and phrases-'Voluntarily' occurring in clause (iv) of section 24(1) of the income-tax act, 1961 Facts The assessee owned two house properties A and B and was deriving income from them. He had raised certain loans, both for the purpose of constructing the said houses and also to meet his personal needs. Regarding the property A, suit was filed against the assessee which was decreed and the suit property was brought to sale. The said building was under requisition by the Government of India and the Government lent certain amount to the assessee by taking a mortgage of the entire house in its favour. The creditor was paid off from this amount. The assessee agreed to pay interest at a particular rate on this amount to the Government. In respect of property B also, on the creditor's insistence on some security being offered, the assessee created an equitable mortgage and under this mortgage he agreed to pay interest at a certain rate. The interest was being paid regularly in respect of both the mortgages and was being allowed as deduction from out of the income arising from the house property till the assessment year 1968-69. However, in view of the amendment of section 24(1)(iv) by the Finance Act, 1968, the ITO disallowed the said interest as deduction for the assessment years 1970-71 to 1973-74. On appeal, the AAC upheld the ITO's order but the Tribunal held the deduction to be allowable under section 24(1)(iv). On reference: Held 552 CIT v. Rajah DhanrajgirijiVol.19 - Sec.II TAXMANDecember, 1984 For claiming deduction under section 24( 1)(iv), as amended by the Finance Act, 1968, three…

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