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TMI Blog2015 (6) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... g in the instant appeal, agitated per its two grounds, as under, is the maintainability or otherwise in law of the assessee's claim of interest paid on borrowed capital (from bank) invested in a house property, against interest income assessable u/s. 56, i.e., in computing the income chargeable under the head of income 'income from other sources': '1. On the facts and circumstances of the case and as per the provisions of law, the learned Commissioner of Income Tax (Appeals) has erred in confirming disallowance of Rs. 14,19,007/- being the amount of interest paid and claimed as deduction against the interest receipts. 2. On the facts and circumstances of the case and as per the provisions of law, the learned Commissioner of Income Tax (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 dated 18/7/2014), wherein the Tribunal, in a similar situation, allowed the assessee's claim for interest on borrowings against the interest arising on bank FDRs, on the security of which the borrowing was raised. 4. We have heard the parties, and perused the material on record. 4.1 Viewed from any angle, the assessee's case is misconceived and not tenable in law. To begin with, the total income under the Act, i.e., chargeable to tax there-under, is to be computed by classifying it, according to the nature of the income, under various heads of income, with the income not covered under any specific head falling to be classified under the residuary head, i.e., 'income from other sources'. Further, income under any head of income is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, being at par, both financially (perhaps, that is - the interest rates on borrowing and monies lent being not known), as well as under the tax regime. Assuming a tax equivalence, while none existed, then, thus, represents the fundamental fallacy in the assessee's argument and case, i.e., the underlying assumption that the two arrangements being financially equivalent (or nearly so), would lead to a similar or same consequence in law as well. We have already clarified that income under the Act has to be necessarily computed following the computation provisions prescribed under the relevant head of income, i.e., under which it falls. That the two arrangements may be financially equivalent would not necessarily imply, even as was found by us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he court wondered, if the assessee had instead taken a loan from a different bank or against any other security? The interest paid did not reduce the income by way of interest on fixed deposit placed by him with the bank in any manner. 4.3 Coming, next, to the decision in the case of Raj Kumari Aggarwal (supra). In the facts of that case the assessee borrowed on the security of the bank FDRs, and gifted the amount to her son. The rationale for the same was explained to be financial inasmuch as a premature encashment of FDRs would result in a lesser (net) interest accruing to her. The adopted course was exhibited to be financially more profitable, i.e., even after accounting for the interest on the loan against FDRs, which borrowing was fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns by the apex court, as in Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167 (SC) and Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. CIT [1997] 227 ITR 172 (SC). In the present case, on the other hand, the bank borrowing has been invested toward another source of income, i.e., income from house property. The same may not necessarily result in any income and, in any case, has no relation to the income by way of interest on the bank deposit, on the security of which the borrowing was raised for investment in house property, and against which income the interest thereon is sought to be set off. That the assessee could have invested in house property out of his sources, in which case he would not have suffered interest at all, is a differen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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