TaxTMI 
TaxTMI 
2015 (4) TMI 584
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....ed from Tenats as "Capital borrowed" for the purpose of Sec. 24(b) of the I.T. Act 1961. ii) The Learned CIT9A) has erred in law and on facts not considering the provision u/s 24(b) of the Act wherein interest paid on money borrowed for the purpose of repaying old loan and not an interest paid on security deposits from tenants. iii) The Learned CIT(A) has erred in law and on facts in allowing interest paid on 'Security Deposit' from tenant u/s. 24(b) of the I.T. Act iv) The Learned CIT(A) has erred in law and on facts in differentiating between the term 'Security Deposit' and 'Borrowed Capital" v) The Learned CIT(A) has erred in law and on facts in considering the expression ''capital borrowed" predic....
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.... Reliance Industries Ltd. of Rs. 11 crores for the purchase of immovable property at Mittal Court, Nariman Point. The said loan was interest free and was provided for a very short period to be repaid within the period of 60 days. The property was purchased for Rs. 10,07,69,540/-. Thereafter, the assessee let out these properties to various tenants and in terms of the agreement assessee received deposits from these tenants for sum aggregating to Rs. 10,25,40,000/-. These deposits were interest bearing where the assessee had to pay interst @ 6%. These deposits were utilized for the repayment of loan taken form the Reliance industries. The assessee's submission in this regard have been incorporated by the AO from pages 2 to 4 of the assessment....
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....3.03.2007 SPA Merchant Bankers Ltd. Deposit 1,00,00,000/- 13.03.2007 SPA Securities Ltd. Deposit 3,00,00,000/- 22.03.2007 SPA Merchant Bankers Ltd. Deposit 9,40,000/- 22.03.2007 SPA Capital Services Ltd. Deposit 10,00,000/- Total Borrowings 10,25,40,000/- Then again in the A.Y. 2008-09, the assessee accepted further deposits of Rs. 10,39,000,00/-. These amounts were utilized to repay the balance of earlier loan taken. The purpose and utilization of subsequent loans/deposits was submitted before him in the form of fund flow statement and the bank statement. These deposits were in fact were a kind of loan only, as it beared the interest rate of 6%. Such a loan on deposi....
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....osit was nothing but interest bearing capital! loans. Any interest bearing loan/capital taken for repayment of original loan partakes the character of original loan as explained and recognized in sec.24 of the IT Act. In my considered view, if interest is payable on amount repayable, such interest expenses is allowable as deduction u/s 24(b) of the Act Whether term used for the amount borrowed is ''Security deposit" or ''Borrowed Capital 'of "Borrowed loans". If interest is payable on security deposit the amount was nothing but loan or capital borrowed. Since interest was payable on such amount taken in the name of "security deposit, there existed relationship of lending and borrowing. It is also important to note as to ....
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....d submitted that the assessee has repaid the loan from the deposits received from the tenants of the property. Such deposits cannot be equated with the loan as the same was in lieu of usage of the property for rent. From the perusal of the lease agreement also, it is clear that apart from the rent, the assessee has received deposits though on interest @ 6% per annum. These deposits cannot be treated as borrowed capital either for the purchase of property or for the repayment of old loan. Thus, assessee's claim for interest cannot be allowed within the ambit of section 24(b). 7. Before us the learned counsel strongly relied upon the order of the Ld. CIT-(A) and submitted that the assessee has mostly taken loan from the various parties....