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2014 (5) TMI 1129 - AT - Income TaxDeduction u/s 24(b) - deduction for interest paid - Held that:- The meaning given at Sl No. 2 for renewal would definitely take in its stride the conversion charges also because the dictionary clearly states that recreation of legal relationship or replacement of old contract with a new contract is covered by the definition of renewal. This means in the case of the assessee when the original contract for the property was for industrial shed and after charging the conversion charges the contract would be for commercial property. In our opinion, this would be definitely covered by the expression 'renewal". In practical terms the assessee could not have used the property except for running the industry in electrical items but now the assessee has been allowed to use the same in commercial terms and i.e. why the assessee has been able to exploit the same by giving commercial site on rent for the purpose of running a hotel. This is because of the renewal made by the Chandigarh Administration by changing the usage of the property. Thus the assessee is definitely entitled to claim the deduction for interest paid to Chandigarh Administration and accordingly we set aside the order of the Ld. CIT(A) and direct the Assessing officer to allow deduction of this interest. As far addition on account of interest paid to other parties No doubt the assessee has raised further funds, therefore Sarovar Hotel Pvt. Ltd by way of interest bearing securities but the same has not been shown to be paid for payment of conversion charges. In fact we had asked the Ld. Counsel to file the copies of partner's capital account because the Assessing officer has given a finding that there was a negative balance in the partner's capital account. These were filed and perusal of the same clearly show that there is negative balance in the partner's capital account. Even the balance sheet clearly show that partner's capital account had a negative balance. Therefore clearly the further borrowing have gone towards the payment to the partners and same are not related to the conversion charges. To this extent the Assessing officer is right that the disallowance has to be maintained. We may clarify that this contention is quite right because in the computation the assessee has claimed interest of only ₹ 60,18,199 and the income has been computed by the Assessing officer on the basis of computation filed by the assessee. - Decided partly in favour of assessee.
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