2013 (5) TMI 400

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....ppeals) on 06.08.2010 in relation to the assessment year 2006-2007. 2. First ground of the appeal is against the confirmation of the action of the Assessing Officer in disallowing prepayment charges amounting to Rs. 1,56,68,640 paid to HDFC Limited for closure of loan taken from HDFC Limited for the purpose of acquisition of the premises. Briefly stated the facts of this ground are that in the ....

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....al. 3. We have heard the rival submissions and perused the relevant material on record. There is no dispute on the fact that the assessee availed loan for acquisition of certain premises, the income from which was shown and accepted under the head "Income from house property". The assessee claimed deduction of Rs. 11.05 crore u/s 24(b) of the Act. The Assessing Officer did not allow deduction o....

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....ludes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized". The definition of interest u/s 2(28A) makes it manifest that it has basically two components, viz., firstly, the amount with nomenclature of interest for moneys borrowed and secondly, the amount paid by whatever name called in respect of the mo....

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....bility in respect of the loan, which would have otherwise qualified for deduction u/s 24(b) during the continuation of loan. It is obvious that these prepayment charges have live and direct link with the obtaining of loan which was availed for acquisition of property. It is beyond our comprehension as to how the amount paid as interest for the loan taken is allowable as deduction but the amount pa....