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TMI Blog2017 (8) TMI 1662X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CIT(A) for fresh decision with the direction that he should examine the claim of the assessee in line with above discussion and deduction on account of interest should be allowed to the extent the assessee is able to establish that the subsequent loan on which interest is being claimed is used for the purpose of repayment of earlier housing loan and such claim of interest should be restricted to the extent of actual amount of earlier/new housing loan used for acquiring / constructing housing property and it should not be for unpaid interest. The ld. CIT(A) should pass necessary order as per law as per above discussion after providing adequate opportunity of hearing to the assessee- Appeals filed by the assessee are allowed for statistical purposes. X X X X Extracts X X X X X X X X Extracts X X X X ..... 70,61,000/- to acquire the let out property by taking loan from KSFC and other lenders as per the financials which was clearly evident in the Balance sheet of the appellant. 6. The learned Commissioner of Income Tax (Appeals) have erred, in facts and in law, by holding that the last instalment of the KSFC loan would have been paid on January 2005 and the Appellant was eligible to claim interest only up to January 2005 without actually appreciating the fact that KSFC loan was not paid as per the originally agreed schedule and it was paid only out of the loan from SBI. 7. The learned Commissioner of Income Tax (Appeals) have erred, in facts and in law, failed to understand the scope of the word "borrowed capital" is wider than the term "money" and includes overdue loans." 4. It was submitted by the ld. AR of assessee that copy of loan sanction letter dated 26.09.2000 from Karnataka State Financial Corporation (KSFC) is available on pages 15 to 19 of paper book as per which the loan of Rs. 40 lakhs was sanctioned towards purchase of G-1, G-2 and G-3 commercial space which is having estimated cost of Rs. 58.60 lakhs. He also submitted that on page no. 20 of pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... civil work and partition etc as per the requirement of the tenant and also the submission of the assessee that SBI had paid the amount to KSFC towards the loan amount and the same is also reflecting in the bank account of SBI. On page no. 2 of the assessment order for the year 2005-06, the AO came to the conclusion that the claim of the assessee is not acceptable in view of the fact that the assessee has not utilized the loan for the purpose of construction and repair of the house and under the provisions of section 24, interest incurred on borrowed capital is allowable only if the capital is borrowed only for the purpose of construction, renewal or reconstruction of the house property and since, the assessee has not complied with these requirements, the assessee is not eligible to claim for the same amount of Rs. 12,61,165/- towards interest on borrowed capital u/s. 24B of the Act. Hence, it is seen that this claim of the assessee that the loan from SBI is for repayment of housing loan earlier borrowed from KSFC is not disputed by the AO in the assessment order. Now in the light of these facts, I examine the applicability of various judgments cited by both sides. As per the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered opinion, of this Tribunal order cited by ld. DR of revenue is not applicable in the facts of the present case. 8. Now I examine the applicability of the second judgment cited by ld. DR of revenue being judgment of Hon'ble Punjab & Haryana High Court rendered in the case of Naman Kumar Vs. CIT(supra). In that case, Hon'ble Punjab & Haryana High Court has followed the judgment of Hon'ble apex court rendered in the case of Shew Kissen Bhatter Vs. CIT as reported in 89 ITR 61(SC) wherein it was held that only simple interest is allowable and not compound interest. By following this judgment, it was held by Hon'ble Punjab & Haryana High Court that interest paid on interest levied by bank because of non-payment of instalments of borrowed capital to bank is not qualified as an admissible deduction and it was held that the Tribunal was right in disallowing the balance interest and allowing deduction in respect of simple interest. Hence it is seen that as per this judgment of Hon'ble Punjab & Haryana High Court, interest on interest is not allowable but interest on the principle amount of borrowed fund which was used for the purpose of housing property is allowable. 9. Now I examine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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