INCOME TAX ACT, 1961

Section 24

Income from house property - Deduction under section 24(b) - Borrowed funds used to pruchased bonds later on bonds redeemed -

AO made addition on account of deduction of interest expenditure under section 24 (b). However, the same was deleted by CIT(A) by ignoring the fact that interest was paid on loan which was meant for investment in shares and bonds and not for the purpose of purchasing the property. Grievance of AO was that that said interest expenditure cannot be granted as deduction from income from house property. Therefore, as assessee had not invested any fund for purchase and acquisition of the property but used loan for investment in the bonds, income from which was claimed as exempt income and interest expenditure could not be allowed as a deduction under section 24 (b). Held: CIT(A) reached at a finding that until the amount was utilized in the investment of bonds et cetera, no interest can be claimed by assessee as deduction under the income from house property. However, when such bonds have been redeemed and utilized for the purpose of purchase of the property, then borrowed fund from bank amounts to utilization of same for the purpose of purchase of the property. Since the amount was purchased from the borrowed funds of bank, interest paid by assessee should be allowed as a deduction and directed AO to ascertain the interest on funds utilized for acquisition of the property on which rental income was earned and to grant deduction of such interest under section 24 (b).

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

INCOME TAX ACT, 1961

Section 14A

SUBSCRIBE FOR FULL CONTENT

OR Try Reload the Page