1979 (7) TMI 146 - AT - Income Tax

Summary

Issues:
- Deductibility of interest payment in computing property income when property was let out for a partial period.

Analysis:
The case involved a dispute regarding the deductibility of interest payment in computing property income when the property was let out for a partial period. The assessee had let out a newly constructed property and claimed deduction of interest paid on borrowings utilized for construction. The Income Tax Officer disallowed a portion of the interest payment, treating it as capital expenditure since the property was let out only from a specific date. The Appellate Assistant Commissioner (AAC) allowed the entire interest payment as a deduction, considering the property's annual letting value. The Revenue contended that only proportionate interest for the period of letting out should be allowed under Section 24(1)(vi). The assessee argued that there was no such restriction in the provision and that interest deduction should be allowed for the entire previous year. The Appellate Tribunal agreed with the AAC's decision, emphasizing that the deduction of interest should be allowed for the entire accounting year without restriction based on the months of rent received. The Tribunal also cited a previous decision supporting their view. Consequently, the Revenue's appeal was dismissed.

This judgment clarifies the interpretation of Section 24(1)(vi) regarding the deduction of interest payable on borrowed capital for computing income from house property. It establishes that the interest deduction should be allowed for the entire previous year, irrespective of the specific months the property was let out, as long as the property was acquired or constructed with borrowed capital. The decision emphasizes the importance of considering the annual value of the property and the absence of any stipulation restricting the interest deduction based on the period of letting out. The Tribunal's reliance on a previous decision further strengthens the reasoning behind allowing the full interest payment as a deduction in such cases.