TaxTMI 
TaxTMI 
2023 (3) TMI 1050
X X X X Extracts X X X X
X X X X Extracts X X X X
....ngaged in the business of letting out shops and Malls on lease. The assessee had returned income earned under the head Income from Other Sources. The assessee had claimed interest expenses of Rs.7,28,00,166/- against the same as being paid on borrowings for acquiring/constructing such properties u/s 24(b) of the Act. From the facts before him the AO noted that the funds on which interest was paid, being Optionally fully convertible debentures (OCD) of Rs.14.89 Crs, was utilized for repaying outstanding liability of a party M/s JPIPL. He derived from the same that interest had been paid on borrowings used for repayment of original borrowings for construction of property. The AO held that claim of interest on such indirect borrowings for construction was not tenable in law and accordingly disallowed the claim of assesses interest expenses u/s 24(b) amounting to Rs.7,28,00,166/- 4. The Ld.CIT(A) allowed the same noting that the borrowing had been utilized for repaying liability pertaining to construction of Mall and not for repaying loan taken for construction.He therefore held that the loan could be said to be utilized for constructing house property, and interest paid thereon ,he....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction, repair and renovation of the property and not on loan borrowed to repay the original loan taken for the said purpose. He contended that proviso to section 24(b) clearly provides that it was only with respect to interest claimed under section 24(b) of the Act on self-occupied property as stated under section 23(2) of the Act; that the interest paid on loan borrowed for repaying the loan utilized for constructing the said property was allowed. He drew our attention to the 3rdproviso and Explanation to section 24(b) inthis regard. He contended that this benefit was exclusively given only to the properties as per section 23(2) and not to other house properties. Therefore, the assessee's claim had been rightly disallowed by the AO, he contended. 8. The ld.counsel for the assessee, on the other hand, countered by pointing out that this issue has already been dealt in a number of decisions by courts, wherein it has been categorically held that section 24(b) nowhere restricts or excludes the claim of interest paid on loans taken for repaying the original loan taken for construction, renovation and repair of house property; that in all these decisions, it has been categorically he....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tire share capital of the assessee company was owned by J.P. Infrastructure Pvt. Ltd.The assessee purchased land at Raikot and started construction of a building which is to be used as a commercial mall. The construction of the mall was shown as capital work in progress alongwith cost of land. The entire project was taken up for development by JPIPL and also charged fees for the same. They also paid all expenses to the supplier/vendor of the material/services. That expenses remain outstanding in the books of the company. The entire cost of land and construction was funded by JPIPL and the same was shown as current liabilities in the balance sheet. A copy of the liability ledger account of J P Infra. P. Ltd., from 2004-2005 to 2009-2010 is attached for your kind consideration along with the debenture issue account, audit report to verify the application of the fund used for the purpose the construction of the mall building only is attached at page No. _____. > IL&FS Milestone Fund-1 (a scheme of SEBI registered Venture Capital Fund - Milestone Real Estate Fund) ("IL&FS") has purchased entire shares capital of the assessee from JPIPL and its nominee shareholders to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nbsp; JPIPL (SC) 22.12.2008 14,00,000 JPIPL (SC) 27.09.2008 3,50,000 JPIPL (SC) 03.02.2009 10,00,000 JPIPL (SC) 03.03.2009 8,00,000 JPIPL (SC) 05.03.2009 4,00,000 JPIPL (SC.) 27.04.2009 6,00,000 IL & FSr M Fund- 1 14.10.2008 1,00,00,000 JPIPL (SC) 14.10.2008 1,00,00,000 IL & FS- M Fund- 1 24.06.2008 5,00,00,000 JPIPL (SC) 24.06.2008 5,00,00,000 IL & FS-M Fund-1 20.08.2009 14,89,67,07.67 JPIPL (SC) 20.08.2009 14,89,67,077-67 11. He thereafter drew our attention to the findings of the ld.CIT(A) also at page no.10 of the order as under: "6. I have duly considered the submissionof the appellant and also gone through the discussion made in the assessment order. In all the grounds of appeal, only issue involved is whether interest paid on additional loan taken in the form of debenture is allowable or not u/s.24(b). I am of the considered view that as the additional loan taken in the form of debentures is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t case. 14. We have noted from the assessment order that the finding of the AO is that the loan by way of Optionally fully convertible debentures (OCD) of Rs.14.89 Crs was issued to repay outstanding liability of JP Infrastructure Pvt. Ltd (JPIPL).This outstanding liability of JPIPL was found by the Ld.CIT(A) as pertaining to construction expenses incurred on Mall constructed by the assessee. The Ld.CIT(A) noted this fact from the evidences filed by the assessee by way of ledger account of JPIPL showing that the outstanding liability of JPIPL was on account of construction work undertaken by it for the assessee and also the fact of utilizing the OCD for repaying this liability.Copy of ledger account of JPIPL was also placed before us at P. B 33-82. Considering the fact that even the AO noted the OCD being utilized for payment of outstanding liability of JPIPL which the assessee demonstrated as pertained to construction expenses, we find no infirmity in the findings of the Ld.CIT(A) that the loan was utilised not for repayment of an earlier loan but for a liability for construction of property. The ld.DR has been unable to controvert this fact before us. We therefore agree wit....