TaxTMI 
TaxTMI 
1984 (2) TMI 158
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....ners has been narrated, states as follows : "And whereas Smt. Manori Dugar and Shri Sumermal Dugar the two partners of the firm as before mentioned expressed their willingness to retire from the partnership business with effect from the commencement of the Ramnavami year 2031, i.e., 1-4-1974 and the parties hereto having agreed to their retirement from the business, the said two partners have so retired from the partnership business, with effect from the said date. And whereas upon such retirement of the said two outgoing partners accounts of the partnership business have been made, closed and adjusted on 1-4-1974 and the said outgoing partners having themselves examined the said accounts of the partnership business have verified the correctness thereof as showing the true state of affairs of the business as on the date of their retirement. And whereas in consideration of the amounts remaining due payable to the two retiring partners and all their interests and claims in the partnership business and its goodwill they have been allotted the properties of the partnership business as described in Schedule 'A' hereto and as delineated in the map or plan annexed hereto and ther....
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....99. This was paid to him in cash on 27-1-1975. On 1-4-1974 his account was debited with Rs. 60,000 on account of the value of house property transferred to him. The debit balance in his account carried over to the next year was thus Rs. 60,000. The aforesaid debit balance of Rs. 60,000 was paid by him in Ramnavami year 2032 in cash as follows: Rs. 10-2-1976 40,000 17-2-1976 20,000 A sum of Rs. 5,850 was debited to his account by way of interest which remained unpaid at the end of Samvat year 2032. 5. It is the aforementioned interests of Rs. 3,359 and Rs. 5,850 which are the subject matter of dispute in the present appeals. The assessees in question ....
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....own in its return by the firm and the ITO had assessed the same and, therefore, according to him, the ITO could not have rejected the claim of the assessees and thereby assessed the same income twice over once in the hands of the firm, and then again in the hands of the partners. This was, according to him, against law. He has, therefore, pleaded that the order of the AAC should be sustained. 9. I have given careful consideration to the facts of the case and to the rival submissions. Clause (vi) of sub-section (1) of section 24, in terms of which the assessee has claimed the deduction for interest, reads as follows: "(1) Income chargeable under the head 'Income from house property' shall, subject to the provisions of sub-section (2), be computed after making the following deductions, namely:--- (vi) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital." 10. From the reading of the aforesaid clause, it is clear that an assessee in order to put in a successful claim under the aforesaid clause should be able to show: (a) that he has acquired the property within the....
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....onsequently there is no acquisition of properties---Malabar Fisheries Co. v. CIT [1979] 120 ITR 49 (SC). 12. That interest was, in fact, paid by the retired partners to the firm and that the said interest income was returned by the firm in its accounts and was assessed in the firm's hands would be no ground for deducting the interest while computing the property income in the hands of the assessee. The firm has been assessed on it because it received it. But for allowing it to the assessees, we have to see if it is allowable under section 24. It is well known that what is being assessed under the head 'Income from house property' is a notional income. It is not the actual income that is brought to tax. In order to see whether an amount is allowable, while computing the property income, one has merely to look at the relevant section and determine as to whether the conditions laid down therein have been fulfilled. In the present case, as we have seen above, the relevant conditions of section 24(1)(vi), viz., (i) the borrowing of the capital, and (ii) acquiring the property with the help of it have not been fulfilled. There could, therefore, be no question of allowing interest to t....
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....to be made. If after making the computation as indicated in clause (i) of sub-section (2) of section 23, the ITO finds that the income so computed exceeds 10 per cent of the other income, he has to disregard the excess. To find out 10 per cent of the other income and adopting it straightaway as the annual letting value is thus not the mode of computation indicated in the section. It is rather the ceiling beyond which the computation should not exceed. The computation has to be done in the normal course, as indicated in clauses (i) and (ii) of sub-section (2) of section 23. This computation has then to be compared with 10 per cent of other income of the assessee. The lower of the two will be the annual value. Therefore, the direction of the AAC that from the figure of 10 per cent arrived at by the ITO he should further give deduction of Rs. 1,800 is not correct. At the same time, the computation of the ITO cannot be sustained as he has not worked out the annual letting value in the manner indicated in clause (i) of sub-section (2) of section 23 [clause (ii) of sub-section (2) of section 23 does not apply to the facts of this case.] While doing so, he will have to deduct Rs. 1,800 fr....