I-T - Deduction u/s 24(b) is allowable while computing 'income from house property', even if property was acquired, constructed, repaired, renewed or reconstructed with borrowed capital: HC
By TIOL News Service
AHEMDABAD, AUG 17, 2017: THE ISSUE BEFORE THE COURT IS - Whether deduction u/s 24(b) is allowable on a property while computing 'income from house property', even if such property was acquired, constructed, repaired, renewed or reconstructed with borrowed capital. YES is the verdict.
Facts of the case:
The assessee company is engaged in the developing of and renting of immovable property, including shopping complexes and malls. For the AY 2011-12, the petitioner had filed return declaring loss of about Rs.5.08 crores. On scrutiny, the AO considered the petitioner's claim of deduction for interest paid on Optionally Fully Convertible Debentures (OFCD), u/s 24(b) of the Act, and did not disturb this claim of assessee in the assessment order. However, the CIT exercised power of revision u/s 263 and issued SCN. The assessee challenged such revision by the CIT on grounds that the AO had arrived at the conclusion after accounting for all relevant details and factors, and so such assessment could not be disturbed through exercise of revisional powers. Assessee also contended that the amount raised through debentures were utilised for repaying the old loans obtained for the purpose of construction of building and the interest paid on such debentures were therefore, well within the purview of section 24(b) of the Act. However, the CIT did not drop the revision proceedings even then.
On appeal, the HC held that,
++ it is seen that under clause(b) of section 24, while computing income chargeable under the head "Income from house property", the assessee would get deduction in case the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital on the amount of any interest payable on such capital. In the present case, the assessee had issued debentures, and the funds raised through such debentures were utilised for repayment of past loans. These loans were taken for the purpose of construction of building. This aspect, the petitioner pointed out to the AO during the original assessment. Through the accounts, the assessee could establish the precise correlation between the debentures and repayment of past loans. This aspect, the CIT has not controverted in the notice for revision. The AO after examining the issue accepted the assessee's claim for deduction u/s 24(b) even with respect to interest paid on debentures which were utilised for repayment of past loans used for the purpose of construction of the building. The view of the AO was certainly plausible, particularly, in view of clarification issued by the CBDT issued in this regard. It was therefore, not open for the CIT to take such order in revision. Hence, the notice issued by CIT u/s 263 merits being set aside.
(See 2017-TIOL-1567-HC-AHM-IT)