Michelle Y. Poonawalla Vs DCIT (ITAT Pune)
No Deduction of Interest u/s 24(b) on Borrowed Funds Used to Compensate Tenants for Relinquishment of Tenancy Rights :Pune ITAT
In a combined order covering, Pune ITAT dismissed appeals against disallowance of interest u/s 24(b) claimed on borrowed capital used to compensate tenants for giving up tenancy rights.
Assessee had borrowed funds & utilized them to make payments to tenants for vacating premises and thereafter claimed deduction of interest u/s 24(b), contending that such borrowings were linked to acquisition of property income. AO rejected the claim, holding that compensation to tenants was not in the nature of “acquisition, construction, repair, renewal or reconstruction” of property, hence interest on such borrowings was not allowable. CIT(A) upheld the disallowance.
Befoe Tribunal, Assessee conceded that the issue already stood decided against her in earlier years (AYs 2013-14 & 2017-18) by Coordinate Bench of Tribunal vide ITA Nos. 664 & 665/PUN/2024 dated 18.09.2024. Since facts were identical & no contrary decision was placed on record, Tribunal followed its own earlier order. Both sides agreed that issue was squarely covered against Assessee. Tribunal dismissed all three appeals, holding that interest on borrowed capital used for payment to tenants for relinquishment of tenancy rights is not allowable u/s 24(b).
