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.
3. 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.
4. 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.
5. The whole question for decision is whether the mere fact that certain title-deeds were deposited would create a charge on the properties themselves.
6. 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.
7. In this particular case before us, it is not alleged that the property itself was made security for the money borrowed. All that is alleged is that title-deeds were deposited. The deposit of title-deeds, as creating a mortgage, has been recognized only in particular cases (see Section 59, T.P. Act.) Where Section 59 does not apply, there is no rule of law which says that a mere deposit of the title-deeds should be taken as creating a security on the property to which the title deeds relate. If we had before us a definite contract by which immovable properties had been made security for money borrowed, the matter might have been different. No such case is before us, 'We are therefore relieved from deciding whether there can be, in law, a good charge, where it is created or sought to be created by word of mouth. No such question arises and we need not decide it. All that we hold is that a mere deposit of title-deeds outside the towns mentioned in Section 59, T.P. Act, will not amount to; creation of a charge on the properties to which the deeds relate.
8. The result is that our answer to the question is in the negative.
9. Let a copy of this judgment be sent to the Commissioner of Income-Tax for his information. The learned Government Advocate is entitled to a fee of Rs. 100 provided he files his certificate within the time allowed by the rules. The assessees will pay costs of this reference.