MUKERJI - (1.) THIS is a reference by the Commissioner of Income-tax and the facts involved are briefly as follows: There was a joint Hindu family which is now described as Seth Basant Rai Takhat Singh. The family owns certain immovable properties and they have been assessed for the payment of income-tax on the income thereof. The family claims a deduction of a certain amount of money on the ground that that amount was paid by them on account of interest on money borrowed. Their case further is that this money was borrowed on the security of certain title-deeds and the transaction constituted a mortgage on the property. They further said that the money had been borrowed in order to extend the property.
(2.) THE purpose for which the money may have been borrowed would be immaterial. THE whole question is whether any charge was created on the property on the income of which the tax has been assessed. The question that has been formulated by the learned Commissioner is as follows: Whether the deposit with the creditors of title-deeds relating to property for the purpose of borrowing money for the purchase and extension of property constitutes a charge on the property within the meaning of Section 9(1), Clause (4), Income-tax Act, 1922. The language employed is not very expressive, but we can find out from the assessees application itself what was their case. The assessees stated at pp. 6 and 7 in their application that they had borrowed money and they had deposited title-deeds of the property for the extension of which they had borrowed the money. Again they said: The amount borrowed on hundis on the security of property which was extended... from those moneys, and title-deeds of the said property wee placed with the person from whom the money was borrowed is a clear charge on the property.
(3.) THE whole question for decision is whether the mere fact that certain title-deeds were deposited would create a charge on the properties themselves. Section 100, T.P. Act, has been relied upon. It says: Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property. ;