1986 (1) TMI 174

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....ch, 1980. The monthly rent was Rs. 7,000. The assessee had utilised borrowed funds for the construction of the house and wanted deduction of Rs. 50,109 paid as interest in respect of the said loan from the rent and determination of the income from house property in a negative figure. The ITO allowed deduction for sum of Rs 4,175 being interest for the period during which the property was let out and denied deduction in respect of the balance holding that the interest paid for the period prior to the completion of the house was of the nature of capital expenditure. The assessee appealed to the AAC. He affirmed the ITO's order on the ground that in view of the proviso to section 23(1)(c) of the Act the income from property cannot be a loss, b....

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.... the annual value at zero further deductions as provided in section 24 can be allowed and that can result in a loss. For this he relied upon the judgement of the Madras Bench of the Tribunal in Paras Agarbati Co. v. Fourth ITO (1983) 6 ITD 468 (Mad.) in which a similar view was taken. It was observed in that case as below : "On a consideration of the facts and contentions of the parties we find considerable force in the assessee's contention. According to the order and sequence of the provisions of section 22 to 24, it is clear that the deduction contemplated under section 23 in respect of any residential unit is only for the purpose of determining the annual value of concerned property and in determining such annual value, there cannot ....

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....te any authority to the contrary and we are in agreement with the view taken by the Madras Bench and, therefore, we follow it with respect Further the learned counsel for the assessee pointed out that the aforesaid restrictive clause in the provisio to section 23(1) has been deleted by the Finance Act, 1984 and the Explanation as below has been added to sub-clause (vi) of section 24(1) : "(vi) Where the property has been acquired, constructed repaired, renewed or reconstructed with borrowed capital. The amount of any interest payable on such capital. Explanation._ Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital for the period prior to the previous year in which t....