Section 24(b) of the Income Tax Act
The decision most relied on for Section 24(b) is CIT v. Mithilesh Kumari (92 ITR 9), cited in 54 of the 136 judgments on BharatTax that turn on this section.
Leading authorities on Section 24(b)
Interest on borrowed capital used to acquire an asset, paid year after year until the date of sale, must be capitalized and included in the cost of acquisition for computing capital gains.
The nature of the activity giving rise to income is fundamental in determining the deductibility of expenses. Interest on loans for acquiring properties held as current assets is a deductible business expenditure if incurred for business purposes.
Interest paid on a loan to acquire shares can be considered part of the cost of acquisition under Section 48 for computing capital gains, provided it has not been claimed as a deduction against other income. This prevents a double deduction of the same expenditure.
Expenses incurred prior to business commencement but after business setup are deductible as revenue expenses, as the setting up and commencement dates of a business are not necessarily the same.
In the interpretation of taxing statutes, exemption provisions are to be construed strictly, but once eligibility criteria are met, the exemption notification should be liberally construed to give it full play.
Interest income generated from fixed deposits, if purchased due to business exigencies or for the purpose of carrying on business activities, is to be treated as business income and not income from other sources.
Judgments on Section 24(b)
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