COMMISSIONER OF INCOME TAX Vs. SUNIL KUMAR SHARMA

JUDGEMENT

(1.) THIS order will dispose of a bunch of income-tax appeals and income-tax references bearing I. T. A. Nos. 211, 143, 144 of 2001. I. T. R. Nos. 26, 187, 188, 226 to 228 of 1999, involving a common question of law and facts. For the sake of convenience, the facts are being taken from Income-tax Appeal No. 211 of 2001.

(2.) THE petitioner is an individual. He filed the return for the year 1992-93 on August 31, 1992, declaring an income of Rs. 96,187. 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(l)(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, renewal or reconstruction of the property. THE assessee preferred an appeal before the Commissioner of Income-tax (Appeals), Chandigarh, who vide her order dated May 31, 1993, allowed the claim for deduction of interest under Section 24(l)(vi) of the Act.

(3.) MR. R. P. Sawhney, learned counsel for the appellant, states that for the purpose of claiming deduction under Section 24(l)(vi) of the Act, it is necessary that cash should have been actually borrowed and paid against the purchase price and that there should have been a relationship of a borrower and lender qua the person to whom the interest is paid. According to him, the unpaid purchase price cannot be considered as capital borrowed by the purchaser from the seller. He relied on the judgment of the Supreme Court in Bombay Steam Navigation Co. (1955) P. Ltd. v. CIT [1965] 56 ITR 52, and also on the decision of this court in CIT v. Four Fields P. Ltd. [1998] 231 ITR 262, and those of the Bombay and Madras High Courts in Metro Theatre Bombay Ltd. v. CIT [1946] 14 ITR 638 (Bom) and K. Govinda Bhatt v. CIT [1999] 235 ITR 528, respectively.