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of <h1>Court allows deduction for interest on unpaid purchase price under Income-tax Act</h1> The High Court of Punjab and Haryana ruled in a series of income-tax appeals that the unpaid purchase price can be considered as borrowed capital for ... - Issues involved: Interpretation of deduction under section 24(1)(vi) of the Income-tax Act, 1961 regarding unpaid purchase price as capital borrowed for property acquisition.Summary:The High Court of Punjab and Haryana addressed a series of income-tax appeals and references concerning the deduction under section 24(1)(vi) of the Income-tax Act, 1961. The case revolved around an individual taxpayer who claimed a deduction for interest paid on instalments to the Notified Area Committee for a property acquired on a commercial site. The Commissioner of Income-tax (Appeals) allowed the deduction, which was upheld by the Income-tax Appellate Tribunal. The Revenue challenged this decision, arguing that the unpaid purchase price cannot be considered as capital borrowed for the property acquisition.The Court examined the provisions of section 24(1)(vi) of the Act, which allow deduction of interest on borrowed capital for property acquisition. It deliberated on whether the unpaid purchase price could be deemed as borrowed capital. The Court emphasized that the purpose of the provision is to incentivize building construction and should not be narrowly interpreted. It concluded that the unpaid purchase price should be treated as borrowed capital, citing the decision of the Calcutta High Court in a similar case.In analyzing the authorities cited by the appellant, the Court distinguished cases where interest was disallowed due to specific circumstances not present in the current case. It highlighted that in the present scenario, the taxpayer had acquired the property and was earning rental income from it, supporting the allowance of the interest deduction under section 24(1)(vi) of the Act.Ultimately, the Court upheld the decisions of the lower authorities, affirming that the interest portion of the purchase price included in the instalments was eligible for deduction under section 24(1)(vi) of the Act. Consequently, all appeals by the Revenue were dismissed, and the questions of law were answered in favor of the taxpayer.
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