Interest deduction for house property depends on proof that borrowed capital financed the acquisition; absent that finding, reference could not be answered.

Interest deduction for house property under section 24(1)(vi) depends on a foundational factual finding that borrowed capital was used to acquire the property. Here, the Tribunal had not determined whether any part of the unsecured debentures constituted such borrowed capital; it had only affirmed the remand for that factual inquiry. Because the referred question could not be answered without that missing finding, the Court treated the question as not properly arising for opinion. The discussion also noted that interest would be deductible if the property was initially purchased with borrowed capital, but that issue remained contingent on the remanded fact-finding.

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Issues: Whether the reference question regarding allowance of interest on alleged borrowed capital used for acquisition of house property under section 24(1)(vi) of the Income-tax Act, 1961 could be answered when the Tribunal had recorded no finding on that foundational fact.

Analysis: The Tribunal had not determined whether any part of the unsecured debentures constituted borrowed capital used to acquire the house property. It had merely affirmed the remand made by the Appellate Assistant Commissioner for that factual determination. Since the answer to the referred question depended on a finding which was absent, the question as framed did not arise for opinion. The Court also noted that if the property was initially purchased with borrowed capital, the deduction of interest under section 24(1)(vi) would be justified, but that issue remained contingent on the factual finding to be made in the remanded proceedings.

Conclusion: The reference was returned unanswered because the foundational factual issue had not been decided by the Tribunal.

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