vil Appeal Nos
1155 to 1188 NT of 1990
From the Judgments and Orders dated 7111985 12885 6285 and 24786 of Madras High Court in TCP Nos 73985 3 1385 26084 and 4286
TA Ramachandran and Mrs Janaki Ramachandran for the Appellants
SC Manchanda BB Ahuja and Ms A Subhashini for the Respondent
The Judgment of the Court was delivered by VENKATACHALIAH J
These four petitions for grant of 270 special leave arise out of the orders of the High Court of Judicature at Madras in the corresponding four Tax Case Petitions rejecting the assessee s applications under Sec tion 2562 of the Income tax Act 1961 and the reference of a question of law whether the disallowance under Section 40b of the Income Tax Act 1961 Act of the interest paid by the firm to its partner should be the gross amount of such interest or should be confined to the net amount after setting off the interest in turn paid_by the partner to the firm on his borrowings from the firm
In each of these cases the Income Tax Appellate Tribunal had in substance held that what was disallowable was the entirety of the interest paid by the firm to the partner without reference to any interest that may in turn have been paid by the partner to the firm
The Tribunal in the appeals preferred by the Revenue before it allowed the appeals and reversed the view to the contrary taken in favour of the assessees by the first appellate authority
The Tribunal also declined to state a case and refer a question of law under Section 2561 of the Act to the High Court whereupon the assessees moved the aforesaid Tax Case Petitions before the High Court under Section 2562
The High Court rejected these applications on the view that there was no referable question of law arising out of the appellate orders or  the Tribunal having regard to the earlier pronouncement of the High Court in CIT vs OMSS Sankaralinga Nadar  Co ITR 332 on which the Tribunal had relied
The correctness of the decision of the High Court in the said Sankaralinga Nadar s case has come to be examined by this Court in Keshavji Ravji  Co vs CIT  this Court has taken a view in the light of which Sankaralinga Nadar  Co s case cannot be held to have laid down the law correctly in all respects
The pronouncement of this Court in the said Keshavji Ravji  Co s case supra covers the point raised in these Special Leave Petitions
However as the present special leave petitions arise out of the orders of the High Court rejecting the Tax Case Petitions under Section 2562 of the Act we should in the normal course grant special leave register the correspond ing civil appeals and after setting aside the orders of the High Court remit the corresponding Tax Case Petitions to the High Court with a direction to allow petitions and 20 direct the Income Tax Appellate Tribunal to state a case and refer a question of law for the opinion of the High Court and thereafter to 270 dispose of the references in the light of the pronouncement of this Court in the said Keshavji Ravji  Co s case
This procedure would indeed be an idle time consuming and wholly avoidable formality in the circumstances of the present cases
As the position is now settled we are of the opinion that interests of justice would be served by treat ing the present Special Leave Petitions as directed against and arising from the main Appellate Orders of the Income Tax Appellate Tribunal Madras and after granting Special Leave set aside that part of the appellate orders as per tain to the extent of disallowance of the interest under Section 40b of the Act and direct the Tribunal to dispose of the appeals on the point afresh in the light of the aforesaid pronouncement of this Court
These petitions are therefore treated as directed against the main Appellate Judgments dated 931984 in ITA 1521Mds1982 29284 in ITA No 898Mds1982 3081983 in ITA 1520Mds82 and 222
1984 in ITA 1848Mds83 of the Income Tax Appellate Tribunal Madras and Special Leave granted
The orders of the Tribunal made under Section 2561 of the Act in each of these cases as well as the orders of the High Court in Tax Case Petition 739 of 1985 3 13 of 1985 260 of 1984 and 42 of 1986 are set aside
Further the appellate orders of the Income tax Appel late Tribunal in so far as they pertain to the extent of disallowance of interest under Section 40b of the Act are set aside and the said appeals remitted to the Tribunal for a fresh disposal of the appeals on the point in the light of the pronouncement in Keshavji Ravji  Co s case
There will however be no order as to costs
NPV Appeals al lowed


Summary:
On the completion of construction of the demised prem ises in 1967 the appellant landlord had let it out to the respondent tenant in the same year
Later on 27th May 1972 the landlord filed the eviction suit against the tenant
On 15th July 1972 the UP Urban Buildings Regulation of Letting Rent and Eviction Act
1972 came into force
The tenant deposited in the Court on 2nd September 1977 an amount of Rs4005 being the arrears of rent inclusive of interest and cost
This payment was made within one month after the expiry of the period of ten years stipulated in section 22 of the Act to take advantage of section 39 of the Act
Section 22 inter alia provided that nothing in the Act shall apply to a building for a period of ten years from the date on which its construction was completed while section 39 dealt with pending suits for eviction relating to building brought under the regulation for the first time
The Trial Court gave the benefit of section 39 and refused to order ejectment of the tenant
The landlord s revision application was rejected by the Additional District Judge and his further revision was dismissed by the High Court
Allowing the appeal this Court
 HELD 1 In order to secure the benefit of Section 39 or 40 it must be shown that the suit appeal or revision was pending on the date of commencement of the Act
Secondly if the suit is rounded on the allegation of non payment of rent the tenant must within one month from the date of commencement of the Act or from the date of knowledge of the pendency of the suit deposit in court the entire amount of rent and damages for use and occupation of the building with interest as prescribed and landlord s entire cost of the suit to take the benefit of 187 the said provision
If both these conditions are satisfied the law section 39 mandates that no decree for eviction shall be passed except on any of the grounds specified in the proviso to sub section 1 or clauses b to g of sub section 2 of section 20 of the Act
Similarly section 40 lays down that if an appeal or revision arising out of a suit for eviction of a tenant from any building to which the old Act does not apply is pending on the date of commence ment of the Act the benefit of section 39 will be available to the tenant
199B E The legislature intended to give the benefit of sec tions 39 and 40 to suit appeals or revisions which were pending on 15th July 1972 and in which the deposit came to be made within one month from that date
The expression such  preceding the word commencement  is clearly sugges tive of the fact that it has reference to the date of com mencement of the Act and the payment must be made within one month from such commencement
unless such a restricted meaning to the section is given it would not be able to advance the legislative intent to relieve the landlords of new buildings from the rigours of the Act
200F H 3 The Legislature desired to limit the scope of the application of sections 39 and 40 to suits appeals and revisions pending on the date of commencement of the Act ie 15th July 1972 relating to buildings to which the old Act did not apply and to which the new Act was to apply forthwith and not at a later date
This is clear from the fact that the section contemplates deposit of arrears to rent and damages together with interest and cost within one month from such date of commencement  meaning the date of commencement of the Act
200B C RD Ram Nath  Co  Anr
vs Girdhari Lal  Anr  Ram Swaroop Rai vs Lilavathi  3 SCC 452 Om Prakash Gupta etc
vs Dig Vijen drapal Gupta etc
   Vineet Kumar vs Mangal Sain Wadhera   Pasupuleti Venkateswarlu vs Motor and General Traders  AK Gupta  Sons vs Damodar Valley Corporation 1966 I SCR 796 Nand Kishore Marwah vs Samundri Devi  and Atma Ram Mittal vs Ishwar Singh Punia   referred to
4 The Courts below committed an error in giving the benefit of section 39 of the Act to the tenant since admit tedly the tenant could not and had not made the deposit within one month from the date of commencement of the Act on 15th July 1972 but had made the deposit 188 SUPREME COURT REPORTS 1990 1 SCR within a month after the moratorium period expired in 1977
201F