TMI Blog2002 (2) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. One of the sources of income was rent from various immovable properties assessable under the head "House property". The assessee had constructed SCO No. 865, Mani Majra, on a commercial site purchased by him in an auction from the Notified Area Committee, Mani Majra, for which payment is being made as per schedule of instalments given by the Notified Area Committee. The assessee claimed deduction of Rs.80,000 under section 24(1)(vi) of the Income-tax Act, 1961 (for short "the Act"), for the interest portion of the instalments paid by him to the Notified Area Committee. This claim was disallowed on the ground that this amount could not be treated as interest paid on capital borrowed for the purpose of acquisition, construction, repair, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the property-has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital." The short question for consideration is as to whether the unpaid purchase price can be treated as capital borrowed for acquiring the property? It is evident that if a property is acquired by raising a loan, interest paid on such borrowing is an admissible deduction. If that is so, it is not understood as to what difference it can make if a buyer instead of raising a loan from a third person., enters into an arrangement with a seller to pay the sale price in instalments along with interest due thereon. The moment such an arrangement is entered into, the seller becomes the lender qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court was interpreting the term "capital borrowed' in the context of business income only. Similar was the position in Metro Theatre Bombay Ltd.'s case [1946] 14 ITR 638 (Bom). In fact the Bombay High Court rejected the claim for deduction of interest under section 9(1)(iv) of the Indian Income-tax Act, 1922 (which corresponds to section 24(1)(vi) of the Act) on the ground that in terms of the agreement, the ownership in the property had not yet passed to the assessee. It was, therefore, held that when the assessee had not even acquired the property, there was no question of allowing deduction of interest under section 9(1)(iv). There is no such dispute in the present case. The assessee has not only acquired the property, but is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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