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Commissioner of Income Tax, Faridabad Versus M/s Haryana Television Ltd., Faridabad

2016 (1) TMI 228 - PUNJAB AND HARYANA HIGH COURT

Entitlement for the deduction u/s 24(1)(vi) - as per revenue the borrowed capital was not utilized for acquisition, renewal, repair, construction or reconstruction of the property which had been let out but had utilized for acquiring entire equity share holding of the company, so as to transfer the control and management of the company - ITAT allowed the claim - Held that:- The Assessing Officer as well as the CIT(A) had wrongly adjudicated that since the assessee had not borrowed the amount for .....

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e assessee wherein it was held that the interest portion of the installment of the purchase price of let out property was allowable as deduction under Section 24(1)(vi) of the Act. - Decided against the revenue - ITA No. 634 of 2008 (O&M) - Dated:- 8-9-2015 - MR. AJAY KUMAR MITTAL AND MR. RAMENDRA JAIN., JJ. For The Appellant : Mr. Tajender K. Joshi, Advocate For The Mr. Sudershan Goel, Advocate with Ms. Rupinder Kaur, Advocate AJAY KUMAR MITTAL, J. 1. This appeal has been filed by the revenue u .....

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f the case, the Hon'ble ITAT has erred in law in holding that the assessee company is entitled for the deduction u/s 24(1)(vi) though the borrowed capital was not utilized for acquisition, renewal, repair, construction or reconstruction of the property which had been let out but had utilized for acquiring entire equity share holding of the company, so as to transfer the control and management of the company? 2. A few facts necessary for disposal of the present appeal as narrated therein are .....

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was paid. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), Faridabad [hereinafter referred to as the CIT(A) ]. The CIT(A), Faridabad vide order dated 5.3.2004 (Annexure A-II) while partly accepting the appeal of the assessee upheld the disallowance of ₹ 10,00,000/- under Section 24 (1)(vi) of the Act. Being dissatisfied with the order, Annexure A-II, the assessee filed the appeal before the Tribunal, who vide order dated 28.9.2007 (Annexure A .....

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t attracted as the amount was not utilized for acquisition, renewal, repair, construction or reconstruction of the property. 4. On the other hand, controverting the aforesaid submissions, learned counsel for the assessee besides supporting the order passed by the Tribunal and relying upon the judgment in Commissioner of Income-Tax v. Sunil Kumar Sharma (2002) 254 ITR 103 submitted that the assessee had purchased the land and constructed building thereon for which the loan was taken and hence ded .....

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present case whether the deduction of interest amounting to ₹ 10,00,000/- paid by the assessee on the borrowed funds satisfied the requirements of clause (vi) of sub-section (1) of Section 24 of the Act. 7. The Assessing officer had disallowed the claim of the assessee for deduction of interest at ₹ 10 lacs under Section 24(1)(vi) of the Act which was upheld by the CIT(A). However, the Tribunal while reversing the said orders of the Assessing Officer and the CIT(A) held that the asse .....

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r of shares. Therefore, the liability undertaken by the assessee for payment of loan and interest thereon was for acquiring the property of the company and there is direct nexus between the loan liability and the acquisition of the property. The relevant findings recorded by the Tribunal read thus:- 13. We have carefully considered the facts and circumstances of the case and the rival submissions. As per the agreement dated 20.11.1975 the assessee company had mortgaged its property. The said mor .....

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property of the company. Thus it cannot be said that the liability undertaken by the assessee for payment of loan and the liability of the interest thereon was not for acquiring the property of the company. In our view there is direct nexus between the loan liability and the acquisition of the property. The Assessing Officer was, therefore, not justified in holding that since the assessee had not borrowed the amount for acquiring the property, the conditions of Section 24(1)(vi) are not satisfie .....

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deduction is permissible on account of interest where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital. The amount of interest payable on such capital against said borrowings is deductible under Section 24 of the Income Tax Act so far as the instant case is concerned. Since the outstanding loan liability was taken over by the assessee simultaneously at the time of transfer of the property of the company under the same agreement, the taking ove .....

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