C.I.T. PTA. vs. ANSHU BANSAL.
What were the facts?
The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, passed an order dated 03.10.1997 in I.T.A. No.1536/Chandi/1993 concerning assessment year 1992-93. The Commissioner of Income-tax, Chandigarh (revenue) sought a reference to the High Court of Punjab and Haryana at Chandigarh on a question of law arising from this order. The assessee is Smt. Anshu Bansal. The dispute pertains to the deductibility of interest paid by the assessee on property allotted on an instalment basis.
What did the High Court hold?
The High Court of Punjab and Haryana at Chandigarh decided the referred question of law against the revenue and in favour of the assessee. The Court noted that this specific question had already been decided by the High Court in two previous judgments: Commissioner of Income-tax v. Sunil Kumar Sharma (2002) 254 ITR 103 and Commissioner of Income Tax v. Master Sukhwant Singh (2006) 155 Taxman 153. In both these cited cases, the High Court had ruled in favour of the assessee on similar issues concerning the deductibility of interest on property allotted on instalment basis. Therefore, following its own precedents, the High Court held that the ITAT was correct in its decision.
What were the issues?
1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in holding that the transaction of allotment of property to the assessee on instalment basis gives rise to the relationship of borrower and lender between the assessee and the Estate Officer and that interest paid by the assessee on instalments constitutes interest on borrowed capital deductible from income from house property u/s 24(I)(vi) of the Income-tax Act, 1961? Assessee's contentions: The assessee argued that the interest paid on instalments for the allotted property is deductible as interest on borrowed capital from income from house property. The ITAT's finding in favour of the assessee on this point is the subject of the reference. Revenue's contentions: The revenue challenged the ITAT's decision, questioning whether the transaction creates a borrower-lender relationship and if the interest paid is deductible under Section 24(I)(vi) of the Income-tax Act, 1961.
Which sections of the Income-tax Act were involved?
24(I)(vi)
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Cause title — parties, addresses and appearances
ORDER: Following question of law has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh, arising out of its order dated 03.10.1997 in I.T.A. No.1536/Chandi/1993 in respect of assessment year 1992-93:- “Whether, on the facts and in the circumstances of the case, the ITAT was right in law in holding that the transaction of allotment of property to the assessee on instalment basis does give rise to the relationship of borrower and lender between the assessee and the Estate Officer and that interest paid by the assessee on instalments constitutes interest on borrowed capital deductible from income from house property u/s 24(I) (vi) of the Income-tax Act, 1961?”
It is not disputed that the question of law, referred, has been decided by
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