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).
FULL TEXT OF THE ORDER OF ITAT PUNE
ITA No.538/PUN/2025 filed by the assessee is directed against the order dated 10.01.2025 of the Ld. Addl / JCIT(A)-5, Kolkata relating to assessment year 2015-16. ITA No.539/PUN/2025 filed by the assessee is directed against the order dated 23.01.2025 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2016-17. ITA No.787/PUN/2025 filed by the assessee is directed against the order dated 25.02.2025 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2018-19. Since common issues are involved in all these appeals, therefore, these wesre heard together and are being disposed of by this common order for the sake of convenience.
2. The only issue raised by the assessee in the above 3 appeals is regarding the allowability of interest u/s 24(b) of the Income Tax Act, 1961 paid on borrowed capital utilized for payment to the tenants for relinquishment of tenancy rights.
3. The Ld. Counsel for the assessee at the outset fairly conceded that the issue stands decided against the assessee by the decision of the Coordinate Bench of the Tribunal in assessee’s own case for assessment years 2013-14 and 2017-18 vide ITA Nos.664 & 665/PUN/2024 order dated 18.09.2024.
4. In view of the above submission of the Ld. Counsel for the assessee and in absence of any objection from the side of the Ld. DR, the above 3 appeals filed by the assessee are dismissed.
5. In the result, all the three appeals filed by the assessee are dismissed.
Order pronounced in the open Court at the conclusion of hearing itself i.e. on 28th August, 2025.
