Case Law Details
ITAT held that subsequent loan taken by assessee to repay his original loan is very much covered for claim the deduction u/s. 24(b) of the Act. It is clear from the facts available on record that the sum of Rs.11.63 crores was utilized for repayment of the original borrowing from M/s. Patton International Ltd is erroneous, which was admitted a loan borrowed for the purpose of acquisition of the property. In the light of the such admitted factual position, we are of the view that the deduction claimed by the Assessee has to be allowed as laid down in the proviso to Sec.24(b) of the Act.
RELEVANT EXTRACT OF THE ITAT JUDGMENT
2. The only issue raised by the revenue in this appeal is as to whether the CIT(A) was justified in deleting the addition of Rs.1,00,12,365/- on account of interest claimed as deduction u/s 24(b) of the Income Tax Act, 1961 (Act).
3. It is not in dispute that the assessee declared income under the head “income from house property”. While computing income from house property the assesee claimed deduction of interest paid on loan borrowed for the purpose of construction of the house property u/s 24(b) of the Act of a sum of Rs.2,28,31,800/-. There is no dispute that the property in respect of which interest expenses was claimed as deduction was originally acquired by a company by name M/s. Centre Point Reality P.Ltd after taking an advance of Rs.29.22 crores from M/s. Patton International Ltd. Subsequently M/s. Centre Point Reality Pvt.Ltd got amalgamated with the assessee company w.e.f. 01.04.2006. The assessee thus became the owner of the house property. It is not in dispute apart from loan of Rs.29.22 crores availed by the assessee from M/s. Patton International Ltd and another loan of Rs.17,50,00,000/- was availed form State Bank of Mysore. The loan from State Bank of Mysore was availed on 04.0 1.2006. This loan stood reduced as on 19.08.2008 to Rs.8.37 crores after repayment. During the previous year the assessee borrowed a sum of Rs.20 crores and utilized the same to repay the outstanding loan of Rs.8.37 crores to State Bank of Mysore and the remaining Rs.11.63 crores for repaying loan to M/s. Patton International Ltd. On the borrowing of Rs.20 crores the assessee paid interest amounting to Rs.1,72,18,169/- and this was claimed against income from house property as deduction u/s 24(b) of the Act.
4. The AO was of the view that it was only the sum of Rs.8.37 crores repaid to State Bank of Mysore that can said to be a loan borrowed for the purpose of acquiring the property and therefore interest paid on such amount was eligible for deduction u/s 24(b) of the Act. With regard to the remaining loan of Rs. 11.63 crores the AO was of the view that this cannot be considered as loan that was utilized for acquiring the property and therefore interest paid on Rs. 11.63 crores was not an eligible deduction u/s 24(b) of the Act. According to the AO the borrowing to the extent of Rs. 11.63 crores was only to repay the amount borrowed for acquiring the property and not for acquiring the property and therefore the requirement of Sec.24(b) of the Act was not
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as per circ 28 20.08.1969 it was clearly mentioned that any new loan taken for repayment of original loan will be allowed as deduction if satisfied by the income tax officer,