9911796707
|
Home
Issues:
- Disallowance of interest payable to estate office under section 24(1)(vi) of the Income-tax Act. - Interpretation of section 24(1)(vi) regarding deduction of interest paid on borrowed capital. - Dispute over whether instalments payable to the estate office constitute borrowed capital for claiming deduction. - Whether interest paid on instalments amounts to interest paid on borrowed capital for deduction under section 24(1)(vi). - Applicability of Board's Circular No. 471 on the issue of deduction. - Comparison with Wealth-tax Act treatment of instalments payable to the estate office. Analysis: The appeal involved a dispute regarding the disallowance of Rs. 66,667 by the Assessing Officer on account of interest payable to the estate office under section 24(1)(vi) of the Income-tax Act. The assessee, along with co-owners, purchased a commercial site on a lease-hold basis and claimed the interest as a deduction against income from house property. The Assessing Officer rejected the claim, stating the instalments payable were not borrowed capital. The first appellate authority upheld this decision. The appellant argued that the interest paid on instalments should be deductible under section 24(1)(vi) as it constituted a debt incurred for property acquisition, citing relevant definitions and legal precedents. The appellant contended that the word "capital" in section 24(1)(vi) is broader than "money," and the interest on instalments should be considered interest on capital used for property acquisition. They referenced Board's Circular No. 471 and legal definitions to support their argument. The appellant also highlighted that the property was treated as owned by the purchaser for wealth-tax valuation purposes, emphasizing the debt nature of the instalments. The appellant's representative argued that the instalments constituted borrowed capital and the interest paid should be deductible under section 24(1)(vi) for income from house property. The Departmental Representative supported the Assessing Officer's decision, claiming that the relationship between the assessee and the estate office was that of a purchaser and seller, not borrower and lender. They argued that the instalments did not qualify as borrowed capital, thus disallowing the deduction under section 24(1)(vi). The Appellate Tribunal analyzed the clauses of the allotment letter and concluded that the transaction created a debtor-creditor relationship between the assessee and the estate office. The Tribunal held that the unpaid instalments constituted a debt incurred by the assessee for property acquisition, making the interest paid deductible under section 24(1)(vi). The Tribunal dismissed the appeal regarding charging interests under sections 234A, B & C. It directed the Assessing Officer to recalculate any applicable interest after giving effect to the order allowing the deduction of interest payable on instalments to the estate office. Ultimately, the appeal was allowed, and the disallowed interest deduction was directed to be allowed, based on the interpretation of section 24(1)(vi) and the nature of the transaction between the assessee and the estate office.
|
