2004 (12) TMI 638

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....children of the assessee by way of beneficial interest in the specific Trust. The assessee has raised the following grounds before us : "The authorities below are not justified in disallowing and adding the interest of Rs. 3,65,040 payable to Dr. (Mrs.) Nayeema Khan Trust, relating to the minors viz. Master Mohammed Iqbal, Master Mohammed Jasim and Ms. Nadia Ahmed under section 64(1)(a) of the Income-tax Act, 1961 under the facts and in the circumstances of the appellant's case. The authorities below have wrongly presumed that the ultimate beneficiaries of the Trust, were the co-owners of the commercial property, while the Trust and owners of the property are different. The authorities below failed to notice that the Trust has not ....

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....d 1991-92, the Trust was paid Rs. 1,55,100 and Rs. 1,45,000 towards interest payments and returns of income of the Trust have been filed. The Trust has also filed Nil returns of income for the assessment years 1992-93 to 1995-96 on 28-3-1996. The Trust being a separate legal entity is accounting the interest receipt on receipt basis, whereas, the co-owners of the commercial property at Cunningham Road, are claiming deduction of the interest payable, to the Trust in terms of section 24(iv) which permits the deduction of interest "payable" and not necessarily paid. The learned ITO erroneously presumed that the ultimate goal of the interest is the beneficiary of the Trust who are also the co-owners of the commercial property at Cunningham Road....

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.... of which she is Trustee. Thus what can be said to have been paid by the assessee to herself only. Thus it cannot be said that what is claimed as paid cannot be said to have been received by the same person. The assessee has to pay to herself and by showing the interest as not paid, the assessee differs the tax liability for an indefinite period which is not an acceptable proposition. In any case such a proposition cannot be accepted in view of the ratio laid down by Hon'ble Supreme Court in McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148. In reply learned counsel for assessee submitted that the ratio laid down by Hon'ble Supreme Court in McDowell & Co. Ltd.'s case (supra) has been diluted to a great extent by a recent judgment of Hon'ble Sup....