Ramesam, J.

1. This matter comes on before us on a reference by the Commissioner of Income Tax under Section 66(2), Income Tax Act. The facts of the case are these. The assessee, Janab Hajee Mohammad Sadak Khoyee Sahib, carries on money-lending business in Vizianagaram within the jurisdiction of the Income Tax Officer, Vizagapatam circle. In the course of his money-lending business he advanced a sum of Rs. 1,50,000 to the Zamindar of Salur in the Vizagapatam District and obtained a mortgage-deed which is Ex. A dated 8th November 1928. The document directs the amount of consideration to be paid to various creditors of the mortgagor. It provides for payment of interest at one per cent. per mensem at the end of the year. If the interest is not fully discharged at the end of the year, overdue interest will be added to the principal and will carry compound interest. The principal amount was to be paid within ten years. At the end of ten years if the amount is not paid, the mortgagee may file a suit for sale. Possession of 10 out of 21 Jeroyati villages in Schedule A attached to the document was delivered to the mortgagee. The other eleven villages were then in the possession of t