9911796707
TMI Blog2015 (4) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of Sec. 24(b) of the I.T. Act 1961. ii) The Learned CIT9A) has erred in law and on facts not considering the provision u/s 24(b) of the Act wherein interest paid on money borrowed for the purpose of repaying old loan and not an interest paid on security deposits from tenants. iii) The Learned CIT(A) has erred in law and on facts in allowing interest paid on 'Security Deposit' from tenant u/s. 24(b) of the I.T. Act iv) The Learned CIT(A) has erred in law and on facts in differentiating between the term 'Security Deposit' and 'Borrowed Capital" v) The Learned CIT(A) has erred in law and on facts in considering the expression ''capital borrowed" predicates the relation of a borrower and a lender; whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immovable property at Mittal Court, Nariman Point. The said loan was interest free and was provided for a very short period to be repaid within the period of 60 days. The property was purchased for Rs. 10,07,69,540/-. Thereafter, the assessee let out these properties to various tenants and in terms of the agreement assessee received deposits from these tenants for sum aggregating to Rs. 10,25,40,000/-. These deposits were interest bearing where the assessee had to pay interst @ 6%. These deposits were utilized for the repayment of loan taken form the Reliance industries. The assessee's submission in this regard have been incorporated by the AO from pages 2 to 4 of the assessment order. The Ld Assessing Officer held that section 24(b) clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chant Bankers Ltd. Deposit 9,40,000/- 22.03.2007 SPA Capital Services Ltd. Deposit 10,00,000/- Total Borrowings 10,25,40,000/- Then again in the A.Y. 2008-09, the assessee accepted further deposits of Rs. 10,39,000,00/-. These amounts were utilized to repay the balance of earlier loan taken. The purpose and utilization of subsequent loans/deposits was submitted before him in the form of fund flow statement and the bank statement. These deposits were in fact were a kind of loan only, as it beared the interest rate of 6%. Such a loan on deposits were utilized for the repayment of original loan taken for the purchase of house property. There is nothing in the section to suggest that deduction of interest is allowable s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recognized in sec.24 of the IT Act. In my considered view, if interest is payable on amount repayable, such interest expenses is allowable as deduction u/s 24(b) of the Act Whether term used for the amount borrowed is ''Security deposit" or ''Borrowed Capital 'of "Borrowed loans". If interest is payable on security deposit the amount was nothing but loan or capital borrowed. Since interest was payable on such amount taken in the name of "security deposit, there existed relationship of lending and borrowing. It is also important to note as to how the money has been utilized. In the case under consideration, the security deposit was interest bearing and second it had been utilized for the purpose of repayment of original l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the property for rent. From the perusal of the lease agreement also, it is clear that apart from the rent, the assessee has received deposits though on interest @ 6% per annum. These deposits cannot be treated as borrowed capital either for the purchase of property or for the repayment of old loan. Thus, assessee's claim for interest cannot be allowed within the ambit of section 24(b). 7. Before us the learned counsel strongly relied upon the order of the Ld. CIT-(A) and submitted that the assessee has mostly taken loan from the various parties. It has also received deposits from the tenants on which assessee had to~ interest. Therefore, such deposit was in the nature of loan only and hence interest paid on the deposits also which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest with or without security. If the deposits are interest bearing and is to be refunded back, then debt is created on the assessee which it is liable to be discharged in future. Here the concepts of debt has to be understood as per the terms of the parties. If the deposits had been security deposit simplicitor to cover the damage of the property or lapses on part of the tenant either for non-payment of rent or other charges, then such a deposit cannot be equated with the borrowed money, because then there is no debt on the assessee. A moment a deposit is accepted on interest, then it part takes the character of borrowed money. It is an undisputed fact here that, these interest bearing deposits has been utilized for repayment of borrow ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
