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2015 (6) TMI 568 - ITAT MUMBAIInterest paid on borrowed capital (from bank) invested in a house property - claim against interest income assessable u/s. 56, i.e., in computing the income chargeable under the head of income ‘income from other sources’ - disallowance of interest paid and claimed as deduction against the interest receipts - Held that:- In the present case, section 24(b) governs the deduction on account of interest on borrowed capital for the purpose of acquiring house property or improvement thereto. The same, however, limits the deduction in respect of self occupied property (SOP) at ₹ 1,50,000/-. This, in fact, even as observed during hearing, is what had led to what we may term as an ‘imbalance’ as per the assessee’s plans. But for this limit, the entire interest on borrowed capital (Rs.15,69,007/-) would stand to be allowed against income under Chapter IV-B, i.e., income from house property, resulting in the two arrangements, i.e., either withdrawing money lent and saving interest to bank, or, alternatively, assuming borrowing for investment in house property, being at par, both financially (perhaps, that is – the interest rates on borrowing and monies lent being not known), as well as under the tax regime. Assuming a tax equivalence, while none existed, then, thus, represents the fundamental fallacy in the assessee’s argument and case, i.e., the underlying assumption that the two arrangements being financially equivalent (or nearly so), would lead to a similar or same consequence in law as well. The disallowance of the assessee’s claim is under s. 24(b) itself and, at best, read with s. 57(iii), and there is no need to travel to s. 14A of the Act; there being no income not forming part of the total income for invocation of the said section, to though either no benefit to the assessee or prejudice to the Revenue. The two investments, i.e., house property and interest bearing loan, have different income potential/implications, and carry different risks. The two streams of income, flowing from vastly different sources, are subject to different computational provisions under the Act, and bear different risk profiles. To say, therefore, that interest on a borrowing applied toward house property be deducted against the income from the property on the security on which the same is raised, is misplaced. Rather, the claim of interest on borrowing applied to a particular source of income (house property) against income arising from the said source of income, i.e., house property (Rs.1.50 lacs) as well as against income from another source, i.e., income from other sources (at ₹ 14.19 lacs), is self contradictory. - Decided against assessee.
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