Section 24(b) interest deduction upheld for borrowings tied to developer repayment and property completion costs.

Interest on borrowings used to repay the developer's loan and to meet finishing and improvement expenditure for a property was treated as deductible under section 24(b). The Tribunal noted that the loan from UCO Bank was connected to the repayment and completion-related costs, and that the supplementary arrangement could not be disregarded merely because later lease deeds did not mention it. It also applied the principle of consistency, holding that a factual position accepted in an earlier scrutiny assessment should not be disturbed in later years without contrary material. On that basis, the disallowance was held unsustainable and the interest claim was allowed.

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Issues: Whether the interest paid on borrowings used to repay the developer's loan and to meet finishing/improvement expenditure for the property was allowable as deduction under section 24(b) of the Income-tax Act, 1961.

Analysis: The property had been developed under a prior agreement and the assessee's claim for interest deduction had been accepted in the first scrutiny assessment. The Tribunal noted that the loan from UCO Bank was linked to repayment of the developer's borrowing and to expenditure claimed for completion and improvement of the building, and that the existence and effect of the supplementary arrangement could not be rejected merely because later lease deeds did not refer to it. The Tribunal also relied on the principle of consistency, observing that a fundamental factual position accepted in the earlier assessment year should not be disturbed in subsequent years without contrary material. On the available record, the disallowance was held to be unsustainable.

Conclusion: The interest claim under section 24(b) was held allowable and the disallowance was deleted.

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