TMI Blog2020 (12) TMI 1151X X X X Extracts X X X X X X X X Extracts X X X X ..... A) to conclude that the aforesaid circular is not applicable as it was issued under the erstwhile provisions of Sec. 24 as it stood prior to 1.4.2002. The new provisions of Sec. 24 are also on the same lines with regard to the scheme of determination of income under the head income from house property and in particular with regard to allowability as deduction of interest paid on loans borrowed for the purpose of constructing the property. Therefore one of the reason given by the CIT(A) for not allowing the claim of the Assessee is therefore unsustainable. Denyi ng deduction of interest paid to Mrs. Kaveri bai is by applying the 3rd proviso to Sec. 24(b) - The expression used in Sec. 24(b) is 'property' and not residential or commercial property. Therefore, irrespective of the nature of the property whether it is residential or commercial, deduction has to be allowed under section 24(b) of the Act. As far as the 3rd proviso to section 24(b) of the Act is concerned, all the provisos to Sec. 24(b) of the Act deal with property referred to in section 23(2) of the Act which refers to a residential property. The proviso only carves out an exception to section 24(b) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee borrowed monies from one Mrs. Kaveri Bai and repaid the loan that was availed by the Assessee from Corporation Bank for the purpose of construction of a commercial building project Indraprastha Equinox . The interest paid on the loans borrowed from Kaveri Bai was a sum of ₹ 30,22,041/-. The AO disallowed the entire claim of deduction on account of interest under section 24(b) of the Act for the following reasons: 3.3 It is pertinent to mention here that the Finance Act, 2002 has inserted a new third proviso in section 24 of the Act effective from the assessment year 2003-04. The newly inserted proviso provides that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan. 4. On appeal by the assessee, the CIT(A) allowed the claim of the assessee for deduction of interest paid to Corporation Bank but did not allow the claim o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission was that the provisos to Sec. 24(b) applies to a particular category of case falling within Sec. 23(2) viz., property being house used for residence. It does not in any way affect deduction of interest for construction of commercial or any other property. The learned DR relied on the order of the CIT(A). 8. The relevant statutory provisions and CBDT Circular No. 28 dated 20.08.1969 referred to in the order of the CIT(A) are required to be set out. Under Sec. 22 of the Act, the annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head Income from house property . Sec. 23(1) of the Act lays down the manner of determination of Annual Value. Sec. 23(2) of the Act which has been referred to by the AO and the CIT(A) lays down that the annual value of property which occupied by the Assessee and the property which the Assessee could not occupy due his occupation in some other place will be taken at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of this proviso, the expression new loan means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital. 10. Prior to substitution of Sec. 24 by the Finance Act, 2001 w.e.f. 1.4.2002 extracted in the previous paragraph of this order, the provisions of Sec. 24(1) (vi) of the Act, provided for similar deduction as laid down in Sec. 24(b) of the Act and the said provisions read thus: Deductions from income from house property. 24. (1) Income chargeable under the head Income from house property shall, subject to the provisions of sub-section (2), be computed after making the following deductions, namely:-- (i) to (v)..... (vi) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital. Explanation.--Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as a deduction under a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim of the Assessee is therefore unsustainable. 13. With regard to the other reason given by the revenue authorities for denying deduction of interest paid to Mrs. Kaveri bai is by applying the 3rd proviso to Sec. 24(b) of the Act. On perusal of the provisions of section 24(b), it is clear that the deduction is allowed on account of interest paid on any borrowed capital which is used for the purpose of acquiring, constructing, repairing, renewing or reconstructing of property. The expression used in Sec. 24(b) is 'property' and not residential or commercial property. Therefore, irrespective of the nature of the property whether it is residential or commercial, deduction has to be allowed under section 24(b) of the Act. As far as the 3rd proviso to section 24(b) of the Act is concerned, all the provisos to Sec. 24(b) of the Act deal with property referred to in section 23(2) of the Act which refers to a residential property. The proviso only carves out an exception to section 24(b) of the Act, in so far as it relates to property used for residential purposes and does not deal with or curtail the right of an assessee to get deduction on interest paid on loans borrowed for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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