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Issues involved: Cross appeals relating to the assessment year 2006-07 regarding deduction of loan processing charges u/s 24(b) and disallowance of interest u/s 50C.
Assessee's Appeal (ITA No: 3713/Mum/2010): The assessee, a private limited company engaged in the business as a builder, acquired properties by issuing debentures and paid loan processing charges of Rs. 55,00,000. The Assessing Officer disallowed a portion of the interest claimed by the assessee based on section 50C, stating that only proportional interest related to the market value of the properties was allowable. The CIT(A) disallowed the processing fee as a deduction, but the Tribunal held that processing fee falls under the definition of "interest" u/s 2(28A) and should be allowed as a deduction u/s 24(b). The Tribunal referred to a previous case and a CBDT circular to support this interpretation, ultimately allowing the processing fee deduction and allowing the appeal. Department's Appeal (ITA No: 4526/Mum/2010): The department appealed the CIT(A)'s decision to delete the disallowance of interest u/s 50C. The Tribunal, citing a previous case, held that the Assessing Officer's action was not justified as the borrowed funds were utilized for property purchase, and there was no legal provision for disallowing interest on excess consideration paid for property. The Tribunal upheld the CIT(A)'s decision to delete the disallowance of interest, dismissing the department's appeal based on the identical facts and controversy. Ultimately, the department's appeal was dismissed. In conclusion, the assessee's appeal was allowed, and the department's appeal was dismissed by the Tribunal.
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