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TMI Blog1985 (11) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... dent Engineer, Public Health, West Circle, Hyderabad, for the house purchased in Middle Income Group Housing (MIGH) Scheme. The ITO disallowed the claim on the ground that the interest payment is not relevant for this assessment year. On appeal, the AAC directed the ITO to allow interest payment as claimed since the assessee has been following the method of cash system. Against the same, the revenue has preferred this appeal. 2. The learned departmental representative strongly urged that the interest of the earlier years cannot be allowed in this year. The interest relating to this year alone is deductible. The AAC was not justified in allowing the claim on the ground that the assessee follows the method of cash system of accounting. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out of the borrowed capital under the MIGH Scheme. Under clause (vi) of sub-section (1) of section 24 where property has been acquired with borrowed capital, the amount of any interest payable on such capital is deductible from the income from house property. The words used in the above clause (vi) are 'interest payable'. In contrast to this in clause (vii) the word used is 'paid'. Thus, on account of the clear language used in clause (vi) the interest payable in that previous year alone is allowable irrespective of the fact whether it is paid or not. On the loan amount interest was payable on yearly basis. It may be that the interest is paid at the end of the instalments but it is payable on the loan on yearly basis. Hence, the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee paid the interest or not the amount payable with reference to a particular year would alone represent deduction. The ratio laid down in the above cases squarely apply to the instant case. 4. In my view the interest relating to the earlier years is not allowable as deduction in this year. Only the interest relating to this year is allowable. I reverse the order of the AAC. Since the ITO has not allowed the interest which relates to the previous year relevant to this assessment year, i.e., 1981-82 which is allowable I direct the ITO to allow the interest to the extent it relates to the previous year relevant to this assessment year. I uphold the disallowance of interest which relates to the earlier years. 5. In the result, the appeal i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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