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TMI Blog2023 (3) TMI 1089X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in sustaining addition made towards disallowance of interest on flimsy grounds like probability or improbability of construction of building in a short period ignoring fact that what was constructed by the assessee is unfinished building. AO is erred in disallowing interest claimed towards borrowed capital u/s.24(b) - CIT(A) without appreciating the facts simply sustained additions made by the AO and thus, we direct the AO to delete additions made towards disallowance of deduction claimed towards interest paid on loan borrowed from SBI u/s.24(b) - Decided in favour of assessee. - ITA Nos.449 & 450/Chny/2018 - - - Dated:- 30-11-2022 - SHRI V. DURGA RAO, HON BLE JUDICIAL MEMBER AND SHRI G. MANJUNATHA, HON BLE ACCOUNTANT MEMBER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i, Sreevalsam, Thevally Post, Kollam West Village, Kollam District, Kerala. The assessee did not file return of income for the AYs 2007-08, 2008-09 2009-10. Therefore, a notice u/s.148 of the Act, dated 07.03.2014 was issued for the AYs 2007-08 2008-09. The case has been, subsequently, taken up for scrutiny assessment proceedings and during the course of assessment proceedings, the AO noticed that the assessee has claimed deduction towards interest paid on borrowed capital u/s.24(b) of the Act, towards loan availed from State Bank of India (in short SBI ). In order to ascertain the correctness of claim of interest u/s.24(b) of the Act, the AO has issued notice u/s.133(6) of the Act, to SBI and obtained necessary information including c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om these facts that a portion of the building let out was completed by October, 2006, from which date enhanced building tax is charged by the Corporation of Coimbatore and tenant has occupied the property from January, 2007 onwards. The loan was sanctioned only on 16.09.2006 whereas the enhanced property tax on completion is levied from 01.10.2006. Hence, it is improbable to believe that the loan was utilized for the construction of the property from where the assessee has received rental income. Therefore, opined that there is no error in the reasons given by the AO to disallow interest u/s.24(b) of the Act, and thus, rejected the arguments of the assessee and sustained additions towards disallowance of interest u/s.24(b) of the Act. Aggri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tablish nexus between borrowed funds and construction of building. Even before the Tribunal, the assessee could not file any evidences to prove that borrowed funds from SBI has been utilized for construction of building, on which, rental income has been derived. In absence of any evidences, the AO has rightly disallowed interest paid on term loan and their orders should be upheld. 7. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. There is no dispute with regard to the fact that the assessee has availed term loan from SBI for the purpose of construction of building under Rent Plus Scheme . In fact, the bank in reply to Notice u/s.133(6) of the Act, issued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AY 2007-08. Further, when the assessee has let out the building in the Financial Year relevant to the AY 2007-08, then, in our considered view, the assessee can claim interest paid on borrowed capital for the purpose of construction of building u/s.24(b) of the Act, against rental income while computing income from house property. In this case, since the assessee has let out the building from January, 2007 onwards in the Financial Year relevant to the AY 2007-08, it has rightly claimed interest paid on borrowed capital u/s.24(b) of the Act. The Ld.CIT(A), although, accepted the fact that the assessee has borrowed loan from bank for the purpose of construction of building and also said building has been let out, erred in sustaining addi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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