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Interpretation of section 80V of the Income-tax Act, 1961 regarding deduction of interest on borrowed amount for payment of tax. Validity of borrowing from individuals Taral and Swati for the purpose of payment of tax under the Act. The judgment revolves around the interpretation of section 80V of the Income-tax Act, 1961, specifically regarding the deduction of interest on a borrowed amount for the payment of tax. The case involved the assessee borrowing funds from individuals Taral and Swati and claiming relief under section 80V for the interest paid on these borrowings. The Income Tax Officer (ITO) disallowed the claim, stating that the amounts were not borrowed for tax payment but to repay a previous loan. The Commissioner (Appeals) upheld this decision. The primary issue before the tribunal was whether borrowing from Taral and Swati could be considered as borrowed for the purpose of tax payment under section 80V. The assessee argued that despite changing lenders, the purpose of borrowing remained the same - to pay tax under the Act. The counsel contended that the section aims to encourage timely tax payment, even if it requires borrowing. They relied on legal precedents and circulars to support their interpretation. The tribunal analyzed the legal precedents cited by the assessee, emphasizing that the facts of the present case did not align with the interpretations in those cases. The tribunal highlighted that at the time of borrowing from Taral and Swati, the tax had already been paid, rendering the loans unnecessary for tax payment. The tribunal stressed the importance of adhering to the language of the statute and not extending interpretations beyond the statutory words. Regarding the circular referred to by the assessee, the tribunal clarified that circulars should only apply to cases within the specified section and cannot establish legal principles. The tribunal rejected the alternative ground raised by the assessee, arguing that interest paid on amounts borrowed for tax payment is not deductible under section 57 of the Act. The tribunal ultimately rejected the appeals for the two years, upholding the disallowance of the deduction claimed under section 80V. In conclusion, the judgment reaffirmed the importance of interpreting tax statutes based on the language used, without extending interpretations beyond statutory words. It emphasized the need to adhere to legal principles and precedents while considering deductions for tax-related borrowings, ultimately ruling against the assessee's claim for deduction under section 80V.
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