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2012 (4) TMI 336 - ITAT JODHPURInterest claim for deduction u/s. 24(b) in the computation of income from house property - Normal interest versus penal interest versus interest on interest - allowed at nil by the Revenue as the interest on unpaid capitalized interest is not envisaged for allowance u/s 24(b) – Held that:- the term 'interest' is defined comprehensively u/s. 2(28A) to include on any debt and, more importantly, the same is in respect of 'capital borrowed'. - The word 'capital' is wider in scope than the term 'money', and under appropriate circumstances, as the present one, include part of the debt that the seller, a financial institution, has agreed to extend, on charge of interest, to the assessee– purchaser. The interest deductible is the actual interest payable by the assessee in respect of the capital borrowed, and not one which would have been payable under a different fact setting than the actual one. - the claim must be genuine and not a result of an artifice, arising as a device to inflate the interest expense with tax or other motivation. There is no scope for bifurcating the interest into normal and penal components, as done by the Revenue. The agreement is clear. The capital is to be repaid as per a time schedule. If not paid thereat, additional interest would become chargeable for the period of default, i.e., till the payment of the installment. This would not be interest on interest, but a higher rate of interest on the capital borrowed and, thus, allowable u/s. 24(b) of the Act. Interest at normal rate allowed - Interest at panel rate allowed - Interest on Interest is not allowed.
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