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TMI Blog2005 (6) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... commencing from the month falling after completion of the house. The recovery towards interest will start immediately after the liquidation of the principal and the interest is payable in 60 monthly instalments. The assessee repaid the entire principal amount by January 1999. Subsequently, interest of Rs. 4,000 per month was paid. During the previous year relevant of the assessment year 2001-02 the total amount paid towards interest was Rs. 48,000 which was set off against the income from house property and the resultant loss of Rs. 31,544 was declared under the head 'property income'. 3. The Assessing Officer observed that the interest payable on principal accrues year after year on the reduced balance of principal, though under HBA Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity to pay interest it cannot be said that interest is payable in such years. In the instant case, there was no enforceable demand and thus the interest accrued is not payable immediately. Therefore, it was submitted that accrual basis has no relevance in the instant case and the CBDT Circular which gives concession to the Government employees is not binding on the assessees. Learned CIT(A) observed that the principal amount was actually recovered from assessment years 1998 to 1999 and, as per the contract, the interest amount was recovered from February 1999 onwards though the interest accrued on year-to-year basis from the date of taking the loan. He further observed that the principal amount having been recovered in the earlier years, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term 'accrued' inasmuch as the expression 'payable' has to be understood in the sense that interest is recoverable in that year whereas in the instant case interest is recoverable by the employees only upon the recovery of the entire principal amount and not prior to that date. 7. On the other hand, learned DR strongly relied upon the Circular issued by the CBDT wherein it was clarified as under: "Since the word used is "payable", deduction under section 24(1)(vi) would be on the basis of accrual of interest which would start running from the date of the drawal of the advance. The interest that accrues is to be calculated annually in terms of rule 6 of the House Building Advance Rules on the balances outstanding on the last day of each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would start running from the date of drawal of advance. However, while considering the provisions of section 43B of the Act, the A.P. High Court in the case of Srikakollu Subba Rao Co. v. Union of India [1988] 173 ITR 708 at pages 718 and 719 observed as under: "It is urged that section 43B can have no application to cases where the statutory liability which was incurred in the accounting year is also not payable according to the statute in the same accounting year. We find considerable force in the contention of Sri Swamy. In order to apply the provisions of section 43B, it seems to us that not only should the liability to pay the tax or duty be incurred in the accounting year but the amount also should be statutorily "payable" in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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