Income Tax Appellate Tribunal - Ahmedabad
Assistant Commissioner Of Income-Tax vs Kantilal D. Shah on 24 September, 1991
Equivalent citations: [1992]40ITD1A(AHD)
ORDER
R.L. Sangani, Judicial Member
1. This appeal by the Department relates to the assessment year 1985-86.
2. From the assessment order it appears that the assessee had deposited certain amount in fixed deposits in respect of which the assessee was entitled to receive interest. The assessee took loans on the security of those fixed deposit receipts and utilised those loans for payment of income-tax. The interest on those loans came to Rs. 39,898. The assessee claimed deduction of said interest under Section 80V of the Income-tax Act, 1961. The ITO rejected the said claim. He observed that the assessee had kept the deposits intact and had arranged his affairs in such a way that he could take benefit of provision of Section 80V. According to him, these loans had been taken as early as January 1981 and had not been repaid and as such the intention of the assessee was to defraud the revenue. According to him, provisions of Section 80 V for deduction of interest on money borrowed for payment of taxes applied when there was borrowing and that the meaning of the word "borrow" in a dictionary was "to get temporary use of money without being the original owner". According to him, in the present case, the user of money was not on temporary basis and that it was not user of someone else's money. According to him, the assessee had taken loan on his own money and used it and that such arrangement could not be called borrowings within the meaning of Section 80V.
3. The assessee filed appeal before the Dy. CIT(A). It was submitted before him that the said point had been decided by the first appellate authority by order dated 23-11-1987. The Dy. CIT(A) followed his predecessor's order and directed the ITO to grant deduction. The Department is now in appeal before the Tribunal.
4. The assessee has not appeared. I have heard the learned Departmental Representative. Section 80V lays down that in computing the total income of an assessee, there shall be allowed by way of deduction any interest paid by him in the previous year on any money borrowed for the payment of any tax due from him under this Act. A plain reading of this section clearly indicates that in order to entitle the assessee to claim deduction what all that he has to establish is that interest had been paid by him in the previous year on any money borrowed for the payment of tax due from him under the Act. The fact that borrowing had been made by the assessee and tile fact that interest had been paid by him in the previous year in question are not denied by the ITO. It is also not denied that the borrowing had been made for payment of tax due from the assessee. What the ITO stales is that the assessee should not have arranged his affairs in such a way that he kept his other funds intact and made borrowing for payment of tax. The assessee is entitled to arrange his affair in a way which is most advantageous to him. What we have to see is whether the conditions mentioned in Section 80V are fulfilled. The moneys should have been borrowed for payment of taxes. There should be direct nexus between borrowing and payment of taxes. This has been established in the present case. The fact that the assessee could have encashed his fixed deposits instead of taking loans on the security of those deposits is irrelevant. Besides, the ITO is not right when he observes that this was not borrowing because it was not user of someone else's money. As far. as the loan which the assessee has taken was concerned, that money belonged to the lender before it was advanced to the assessee. Merely because fixed deposits of the assessee had been kept as security against said loan would not mean that it was the assessee's money which he had received. What the assessee had received was loan from the lender. In respect of fixed deposits he was the creditor while in respect of loans taken, he was the debtor. The two capacities are distinct. Considering the entire circumstances, I reject the ground raised by the Department.
5. The appeal is dismissed.