T GOVINDARAJULU Vs. INCOME-TAX OFFICER

JUDGEMENT

(1.) This appeal by the assessee relates to the assessment year 1984-85. The appeal raises a very interesting issue. Fortunately for us there are certain facts which are not in dispute. The assessee constructed a house property. He had taken certain loans for that property. In the accounting year, some of those loans were repaid. Such repayments were made by taking other loans. For the latter loans taken for repaying the original loan, the rate of interest was higher. The genuineness of the loans taken for repaying the original loans is not in dispute. The fact that the latter loans were taken for repaying the original loans was also not in dispute. The interest paid this year was Rs. 50,826. The ITO found that in the earlier year interest paid was Rs. 35,948. According to the ITO, the loans this year were taken at a higher rate of interest and were also taken subsequent to the construction of the property and, therefore, the claim for education of interest should be restricted to Rs. 35,948. He accordingly allowed as a deduction only Rs. 35,948.

(2.) The assessee appealed but without success to the AAC who disposed of the matter on merits consequent to non-appearance of the assessee.

(3.) Before us, the learned counsel for the assessee submits that on the facts as set out by us, the borrowings were only for construction of the property and, therefore, interest paid on the same should be allowed as a deduction in full.