2017 (3) TMI 144 - AT - Income Tax

Interest claimed as deduction u/s 24(b) - Held that - It is clear from the facts available on record that the sum of ₹ 11.63 crores was utilized for repayment of the original borrowing from M/s. Patton International Ltd is erroneous, which was admitted a loan borrowed for the purpose of acquisition of the property. In the light of the such admitted factual position, we are of the view that the deduction claimed by the Assessee has to be allowed as laid down in the proviso to Sec.24(b) of the Act.

Summary

Issues:
1. Justification of deleting the addition of interest claimed as deduction u/s 24(b) of the Income Tax Act, 1961.

Analysis:
The appeal pertains to the Revenue challenging the deletion of an addition of interest claimed as a deduction under section 24(b) of the Income Tax Act, 1961. The primary issue revolves around whether the deduction claimed by the assessee on interest paid on loans utilized for property acquisition is eligible under the said provision.

The assessee declared income under the head "income from house property" and claimed a deduction of interest paid on loans borrowed for the construction of the property under section 24(b) of the Act. The dispute arose from the utilization of loans borrowed for repayment purposes, where the AO disallowed a portion of the interest claimed as a deduction. The AO contended that only the loan amount directly utilized for acquiring the property was eligible for deduction, not the amount used for repayment purposes.

The CIT(A) ruled in favor of the assessee, citing a precedent from a previous year where a similar disallowance was overturned. The CIT(A) held that the assessee was entitled to deduction under section 24(b) for amounts borrowed and utilized to repay a loan acquired for property acquisition. The Revenue, aggrieved by this decision, appealed to the Tribunal.

During the hearing, it was revealed that a similar issue from a previous year had been adjudicated by the Tribunal in favor of the assessee. The Tribunal, based on the facts presented, upheld the CIT(A)'s order, emphasizing that the subsequent loan taken to repay the original loan was covered for claiming deduction under section 24(b) of the Act. The Tribunal highlighted the specific provisions of the Act and the factual position to support its decision.

Ultimately, the Tribunal dismissed the Revenue's appeal, affirming the allowance of the deduction claimed by the assessee under section 24(b) of the Income Tax Act, 1961. The decision was based on the factual position and the provisions of the Act, as interpreted by the Tribunal in a previous case.

In conclusion, the Tribunal's judgment upheld the assessee's entitlement to the deduction claimed under section 24(b) of the Act, emphasizing the legal provisions and factual circumstances surrounding the borrowing and utilization of loans for property acquisition and repayment purposes.