TMI Blog2015 (4) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 borrowed capital. Accordingly, finding of the Ld. CIT(A) in this regard is affirmed. Ground raised by the Revenue are dismissed. - Decided against the revenue. - ITA No. 6920/Mum/2012 - - - Dated:- 25-3-2015 - Shri D. KARUNAKAR RAO And Shri Amit Shukla JJ. For the Appellant : Shri Bhupendra Shah For the Respondent : Shri Neil Philip ORDER Per Amit Shukla, JM: This appeal has been filed by the Revenue against order dated 27.09.2012, passed by Ld. CIT-13, Mumbai for the quantum of assessment passed u/s 143(3) for the A.Y. 2009-10, vide which following grounds have been raised:- i) The Learned CIT(A) has erred in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of 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 ₹ 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 ₹ 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) clearly provides that, interest should be payable on capital borrowed or the capital borrowed must be for the purpose of repayment of old loan. The security deposits cannot be termed as capital borrowed for the purpose of repayment old loan. Thereafter, he also examined the agreement with the assessee and tenants, wherein the noticed that there was clear cut agreement that payment received by assessee was towards deposits bearing interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 strictly on the loans. The borrowings can be in the form of loans or deposits, as the statute envisages the phrase borrowed capital. And not loan alone. The interest bearing refundable deposits was nothing but capital borrowing only for the purpose of section 24(b). Reliance was also placed on the decision of ITAT Mumbai Bench in the case of JCIT Vs. B.K. Patel Family Trust reported in (2006) 9SOT 583. 5. The Ld. CIT-(A) after dealing with the entire observation of the AO as well as submissions of the assessee, and the facts of the case, allowed the claim of deduction of interest u/s 24(b) after observing and holding as under:- It was an admitted fact that security deposit taken by the appellant from the tenants was interest bearing i.e @. 6%. The facts shows that the security deposits taken by the appellant was more than 120 times of the monthly rent of the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by the appellant on security deposit taken from the tenants and loan, if any taken from other persons, was allowable as expenditure ujs.24(b) of the Act. The AO is directed to allow deduction of such interest expenses. 6. Before us, Ld. DR strongly relied upon the order of the AO and submitted that the assessee has repaid the loan from the deposits received from the tenants of the property. Such deposits cannot be equated with the loan as the same was in lieu of usage 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 interes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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