Law:

Section:

I. Section 24 of the Income-tax Act, 1961 - Income from house property - Deductions - Assessment year 1971-72 - Assessee owned a house property and derived income by way of rent and service charges from tenants - Assessee created charge by a trust deed dated 24-6-1936 - Whether merely because that charge related to a secured debt, did not make it an involuntary charge and, therefore, assessee was not entitled to deduction in respect of interest on debentures - Held, yes II. Section 23 of the Income-tax Act, 1961 - Income from house property - Annual value - Assessment year 1971-72 - Assessee owned a house property and derived income by way of rent and service charges from tenants who met half of its tax liability - For first quarter of 1969-70, municipal corporation levied tax of Rs. 1,55,938 per year - By a notice dated 28-5-1969, annual value of aforesaid property was enhanced, subject to objection, with effect from 1969-70 and as a result, tax payable was enhanced to Rs. 2,41,818 per year - Later municipal tax liability was finally determined at Rs. 1,93,643 per year - Whether assessee was entitled to deduction under section 23(1) of Rs. 96,824, i.e., half of Rs. 1,93,643, and not Rs. 1,20,909 being half of demanded amount of Rs. 2,41,818, in determining annual value of aforesaid property - Held, yes FACTS-I The assessee owned a house property and derived income by way of rent and service charges from the tenants. For the assessment year 1971-72, the assessee contended that a charge had been created by the trust deed dated 24-6-1936, and since the interest on debentures formed part of the secured loan, the said interest should be treated as an annual charge, not being a charge created voluntarily. The assessee, therefore, claimed deduction in respect of interest on debentures in the computation of its income from house property under section 24(1)(iv). The ITO disallowed the assessee's claim on the ground that the charge created under the trust deed was a capital charge and was created thereunder voluntarily. On appeal, both the AAC and the Tribunal confirmed the disallowance. On reference: HELD-I In the instant case, the charge was created by the trust deed…

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