TaxTMI 
TaxTMI 
2006 (5) TMI 314
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....ty under section 24(1)(vi) and from other sources as the assessee has received lower return from tax-free NTPC bonds than market rate." 2. The grievance of the revenue is that the CIT(A) has allowed deduction of Rs. 8,57,534 as interest payment against income from other sources. The facts relating to above ground are that the assessee has paid interest of Rs. 8,57,534 to M/s. Mahendra & Mahendra & Co. (for short 'MMC') on a deposit of Rs. 80 lakhs received from it for giving two flats bearing Nos. 101 & 102 at plot No. 16, New India Co-op Housing Society, JVPD scheme, Bombay on leave and licence basis. According to assessee, the said sum of Rs. 80 lakhs was received by the trust from MMC on 15-7-1989 on payment of interest at 6.25% per a....
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....rs. 4. It is agreed by and between the parties hereto that on the said leave and licence agreement expiring by efflux of time or in the event of the said agreement being earlier determined or terminated or coming to an end for any reason whatsoever the owners shall refund with interest as mentioned above to the licensees the amount deposited by the licensees with the owners simultaneously with the licensees removing themselves and other persons using the licensed premises and their articles, goods and chattels from and vacating the licensed premises and giving charge thereof to the owners (licensors). In case the owners do not refund the said amount to the licensees, the licensees shall not be obliged or bound to vacate and give charge o....
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....hat money taken from MMC was not a loan but it was a deposit. Further, the assessee has already claimed deduction under section 24(1)(vi) for the assessment years 1990-91 to 1994-95 in respect of interest paid on borrowed capital. Another argument raised by learned Assessing Officer was that the flats in posh JVPD area were given on a monthly rent of Rs. 1,500, which is ridiculously low and what was received by the assessee from MMC was not a loan but only a deposit. He thus, disallowed the interest of Rs. 8,57,834. 6. The learned CIT(A) on the other hand, opined that interpretation of the clauses 3 and 4 of the agreement, given by Assessing Officer, was strictly literal. The two clauses 3 and 4 of the agreement, especially clause 4, pro....
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....ad sufficient amount of non-interest-bearing funds out of which the investment of Rs. 2 lakhs could have been made in tax-free bonds. Regarding the argument of learned Assessing Officer that interest has been allowed under section 24(1)(vi) in earlier assessment year, the learned CIT(A) held that the interest has nothing to do with any other interest, which assessee has to pay on the borrowed capital after the property has been constructed. Thus, the learned CIT(A) deleted the entire addition of Rs. 8,57,834. 7. Against this, the learned DR relied on the order of Assessing Officer and submitted that what was received by the assessee from MMC was a deposit and not a loan and hence it will not be covered under section 24(1)(vi). Secondly, ....
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....assessee. A sum of Rs. 12,50,000 was utilised for repaying HDFC loan and HDFC interest and other contracts. The details are given by the Assessing Officer on page 7 of his order. A sum of Rs. 20,29,100 being part of deposit received from MMC was utilised for purchase of NTPC tax-free bonds. So far as interest paid on first part of deposit is concerned, it is clearly an allowable deduction under section 24(1)(vi), which reads as under :- "24. (1) Income chargeable under the head "Income from house property" shall, subject to the provisions of sub-section (2), be computed after making the following deductions, namely :- (vi) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the ....
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....uphold the arguments of the Assessing Officer and learned DR that section 24(1)(vi) would be operative only when a loan is taken by the assessee for the purposes of construction of the house property. Thus, we uphold the order of CIT(A) in allowing that part of the interest on the borrowed capital utilised on repayment of loan as well as payment to contractors and others. Regarding second part of the money utilised in purchase of NTPC tax-free bonds, we are of the considered view that matter is required to be re-looked into for the simple reason that it has been ignored as to whether claim of interest on that part of money which was utilised for investing in investment giving tax-free income would be an allowable deduction or not. Section 1....