213. Fresh loan raised to repay original loan taken for constructing/ buying property – Whether interest payable on second loan would also be admissible as a deduction under clause (vi) of sub-section (1)
1. Section 24(1)(vi ) provides that where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital shall be allowed as an admissible deduction in the computation of income from the said property.
2. A question has been raised whether in a case where a fresh loan has been raised to repay the original loan taken for the above purpose, the interest payable in respect of the second loan would also be admissible as a deduction under section 24(1)(vi).
3. The matter has been considered by the Board and it has been decided that if the second borrowing has really been used merely to repay the original loan and this fact is proved to the satisfaction of the Income-tax Officer, the interest paid on the second loan would also be allowed as a deduction under section 24(1)(vi).
Circular : No. 28 [F. No. 8/8/69-IT(A-I)], dated 20-8-1969.
