1997 (8) TMI 108 - AT - Income Tax

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Allowance of deductions for electric charges, chowkidar, and sweeper salaries in computing income from house property.
3. Disallowance of interest on borrowed capital relating to the residential portion of the building.

Detailed Analysis:

1. Condonation of Delay:
The appeal was filed by the Revenue for the assessment year 1990-91, marked as time-barred by one day. The Assessing Officer (AO) submitted a condonation petition explaining the reason for the delay. After hearing both parties and considering the petition, the delay was condoned, and the appeal was admitted.

2. Allowance of Deductions for House Property:
The dispute arose regarding the allowance of deductions for expenses like electric charges, chowkidar, and sweeper salaries while computing income from house property. The AO allowed deductions for municipal tax, repairs, and interest on borrowed capital but disallowed the other expenses. The first appellate authority directed the AO to allow these deductions, citing the need for providing facilities to tenants. However, the Tribunal held that these expenses were not covered under the relevant sections of the Income Tax Act and overturned the first appellate authority's decision.

3. Disallowance of Interest on Borrowed Capital:
Another issue was the disallowance of Rs. 17,484 on account of interest on borrowed capital, relating to the residential portion of the building. The AO disallowed a portion of the interest claimed by the assessee for the residential part. The first appellate authority deleted this disallowance based on the provisions of the Income Tax Act and a CBDT circular. The Tribunal upheld the first appellate authority's decision, stating that the AO failed to establish a clear nexus between the borrowed funds and non-business purposes, thus allowing the deduction.

In conclusion, the Tribunal partly allowed the appeal, agreeing with the first appellate authority's decision on the disallowance of interest on borrowed capital but overturning the decision on deductions for electric charges, chowkidar, and sweeper salaries in computing income from house property.