Interest deduction under section 80V allowed where discharge of tax liabilities was treated as a borrowal in substance.

An alternate claim for deduction of interest under section 80V was not barred merely because it had not been raised in the lower proceedings. The decisive question was whether the interest payment met the statutory requirement, and the debit balance created when the firm discharged the assessee's income-tax and wealth-tax liabilities was treated in substance as a borrowal. The accounting form did not change the real character of the transaction, because the arrangement operated as an advance of money for meeting tax liabilities. On that basis, the interest was held deductible under section 80V of the Income-tax Act, 1961.

---

---

Issues: Whether the assessee was entitled to claim deduction of interest under section 80V of the Income-tax Act, 1961, though the claim was not originally made under that provision, and whether the debit balance created by discharge of tax liabilities by the firm amounted in substance to a borrowal for the purpose of the deduction.

Analysis: The assessee's entitlement to raise an alternate legal claim was not barred merely because the deduction had not been sought under section 80V before the lower authorities. The real question was whether the interest payment satisfied the statutory requirement. On the facts, the firm had discharged the assessee's income-tax and wealth-tax liabilities, resulting in a debit balance in the assessee's account. This was treated as an advance of money for meeting tax liabilities, and the form of the accounting entry did not alter the substance of the transaction. The arrangement was held to be, in substance, a borrowal.

Conclusion: The interest was deductible under section 80V of the Income-tax Act, 1961, and the assessee succeeded.

---