2004 (8) TMI 333 - AT - Income Tax

Summary

Issues:
Appeal against disallowance of interest claim under section 24(b) of the IT Act for assessment year 1991-92.

Analysis:
The appeal pertains to the disallowance of the claim of interest amounting to Rs. 25,061 payable to Mrs. Anup Chadha under section 24(b) of the IT Act for the assessment year 1991-92. The assessee had obtained loans from his wife for constructing a house between 1982 to 1986. The AO restricted the deduction of interest payable to Rs. 5,000 for the assessment year 1986-87. Subsequently, the deduction claim was disallowed entirely by the AO for the assessment year in question, stating that the assessee failed to prove borrowing funds from his wife and alleged the claim was made to reduce tax liability. The CIT(A) upheld the AO's decision. However, the Tribunal found in favor of the assessee after considering the evidence presented. It was noted that the loan was taken from the wife out of her own funds, supported by affidavits and other evidence filed during the assessment year 1986-87. The Tribunal held that the assessee had established the genuineness of the loan taken for the house construction during the relevant period. The Tribunal emphasized that non-payment of interest in the current year does not bar the allowance of deduction under section 24(b) of the IT Act. Consequently, the Tribunal allowed the appeal and directed the AO to calculate the deduction on the interest amount and allow the same in accordance with the provisions of section 24(b) of the Act.

In conclusion, the Tribunal allowed the appeal of the assessee, overturning the disallowance of the interest claim under section 24(b) of the IT Act for the assessment year 1991-92. The decision was based on the assessee's successful demonstration of borrowing funds from his wife for the house construction, supported by relevant evidence and affidavits. The Tribunal emphasized that the deduction cannot be denied solely based on non-payment of interest in the current year, as there could be various reasons for such non-payment. The matter was remanded to the AO for calculating and allowing the deduction on the interest amount in accordance with the provisions of the IT Act.