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2013 (5) TMI 400 - AT - Income TaxPrepayment charges paid to HDFC Limited for closure of loan taken for the purpose of acquisition of the premises - whether allowable u/s 24 - Held that:- The assessee obtained loan from HDFC Limited for acquisition of property. Later on it arranged the money from other sources and repaid the loan as accepted by bank on receipt of prepayment charges. By such repayment, the assessee managed to wipe out its interest liability in respect of the loan, which would have otherwise qualified for deduction u/s 24(b) during the continuation of loan. It is obvious that these prepayment charges have live and direct link with the obtaining of loan which was availed for acquisition of property, thus it is beyond of comprehension as to how the amount paid as interest for the loan taken is allowable as deduction but the amount paid as prepayment charges of the very same loan is not deductible. Both the direct interest and prepayment charges are species of the term 'interest’. Therefore, set aside the impugned order on this issue and order for the grant of deduction. In favour of assessee.
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