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Issues: Disallowance of interest paid by the assessee on borrowed capital.
The judgment addresses an appeal concerning the disallowance of Rs. 14,626 as interest paid by an HUF on borrowed capital related to property income. The HUF had borrowed funds to construct godowns, with the peak investment in the property in question being Rs. 3,66,681 against borrowed capital of Rs. 3,97,670. The ITO had previously accepted the deduction of interest under s. 24 in various assessment years. The dispute arose when a partial partition occurred, leading to a disagreement on the proportionate interest that could be claimed post-partition. The ITO estimated the interest at Rs. 18,280, based on the properties retained by the family after partition. The AAC upheld the ITO's decision, prompting the assessee to appeal the concurrent findings. The appellate tribunal noted that both parties agreed on the admissibility of the claim but disputed the calculation of proportionate interest. The tribunal observed that the authorities failed to provide the basis for their estimates, leading to ambiguity regarding the capital amount on which the allowed interest was calculated. In light of this, the tribunal set aside the lower authorities' orders and directed the ITO to reassess the interest deduction by determining the outstanding borrowed capital related to the retained properties. The tribunal emphasized the need for exact figures to support the claim and instructed the assessee to provide necessary details for verification. The matter was remanded to the ITO for a thorough review and redetermination of the interest allowance under s. 24(1)(vi) of the IT Act, 1961. In conclusion, the tribunal overturned the decisions of the lower authorities and instructed the ITO to reevaluate the interest deduction claim, considering the outstanding borrowed capital and its relation to the properties retained post-partial partition. The tribunal emphasized the importance of precise calculations and directed the assessee to furnish relevant details to support the claim for interest deduction on borrowed capital.
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