Commissioner of Income Tax vs Parakh Kothi Ltd.

Satish Chandra, C.J.—In this case, the Tribunal has referred the following question for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that any part of the unsecured debentures amounting to Rs. 9 lakhs issued on reduction of the share capital of the company was borrowed capital with which the house property was acquired within the meaning of Section 24(1)(vi) of the Income Tax Act, 1961, and interest payable on the same was allowable as a deduction in computing the income of the assessee from the house property?"

In our opinion, the question as has been framed docs not arise because the Tribunal has not recorded any finding that any part of the unsecured debentures amounting to Rs. 9 lakhs issued on reduction of the shared capital of the company was borrowed capital with which the house property was acquired within the meaning of Section 24(1)(vi) of the Income Tax Act, 1961. The Tribunal affirmed the order of the Appellate Assistant Commissioner by which he had remanded the matter to the Income Tax Officer for determining the aforesaid matter. In the connected reference, we have held, that if it is found that the property was initially purchased by borrowed capital, then the direction of the Tribunal that interest was liable to deduction u/s 24(1)(vi) was justified. The same position will be obtained in this case as well.

Subject to this observation, we return the reference unanswered. There will be no order as to costs.

M.G. Mukherji, J.

I agree.