C.I.T. PTA. vs. SUBHASH CHAND.

ITR/173/1999HC Punjab & HaryanaPHHC01038614199907 December 2006Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE RAJESH BINDAL1 pages
AI SummaryDismissed

What were the facts?

The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, passed an order dated 03.10.1997 in I.T.A. No.1539/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 specific question of law. The dispute pertains to the deductibility of interest paid by the assessee, Sh. Subhash Chand, on property allotted on an instalment basis. The ITAT had held that this transaction created a borrower-lender relationship, allowing the interest to be deducted as interest on borrowed capital from income from house property.

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 cases: 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 precedents, the High Court had ruled in favour of the assessee, holding that interest paid on instalments for property allotment constituted interest on borrowed capital deductible under Section 24(1)(vi) of the Income-tax Act, 1961. Therefore, following its own established precedents, the High Court upheld the ITAT's decision. The reference was disposed of accordingly.

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? 2. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in holding 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 property allotment should be treated as interest on borrowed capital and be deductible under Section 24(1)(vi) of the Income-tax Act, 1961. The ITAT had ruled in favour of the assessee on this point. Revenue's contentions: The revenue contested the ITAT's finding that the instalment payment arrangement created a borrower-lender relationship and that the interest paid was deductible. The revenue's arguments are not explicitly detailed but are implied by their challenge to the ITAT's order.

Which sections of the Income-tax Act were involved?

24(1)(vi)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.R. No.173 of 1999 Date of decision: 07.12.2006 Commissioner of Income-tax, Chandigarh. -----Applicant Vs. Sh. Subhash Chand, Chandigarh. -----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE RAJESH BINDAL Present: Mr. S.K. Garg Narwana, Advocate for the revenue. Mr. Rajesh Garg, Advocate for the assessee. -----

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.1539/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

The order continues below.

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