<JGN>R.K.Bali</JGN>, A.M. - (1.)THIS is an appeal by the assessee against the order dt. 3rd February, 1993 passed by the Dy. CIT(A), Chandigarh Range, Chandigarh.
(2.)In the first three grounds of appeal, the dispute is with regard to the action of the Dy. CIT(A) in confirming the disallowance of Rs. 66,667 made by the AO on account of interest payable to the estate office under s. 24(1)(vi) of the IT Act.
Briefly, the facts are that the assessee along with two other co-owners, namely, Harjit Kaur and Harpal Singh Ahluwalia, purchased one commercial site No. 461-462, Sector 35-C, Chandigarh in open auction held on 13th March, 1988, for a sum of Rs. 21,32,000, for 99 years leasehold basis. As per the allotment letter issued by the Estate Officer, Chandigarh, the purchasers were required to deposit 25 per cent of the consideration at the time of auction. The remaining amount was payable by the allottees within 30 days and no interest was payable on this payment. Alternatively, as per cl. 5 of the allotment letter, the balance amount can be paid in three equal yearly instalments along with interest at 7 per cent per annum. Before the AO, the assessee claimed that the interest paid on instalments was interest on borrowed capital and as such admissible as deduction against income from house property under s. 24(1)(vi), relying on the decision of Hon'ble Supreme Court in the case of Shew Kissen Bhatter vs. CIT (1973) 89 ITR 61 (SC). The AO, however, rejected the claim of the assessee holding that the instalments payable by the assessee to estate office on account of payment of bid money cannot be treated as borrowed capital because there was no relationship of borrower and lender between the assessee and the estate office. The AO accordingly disallowed the claim of deduction on account of interest amounting to Rs. 66,667 after referring to the decision of the Hon'ble Supreme Court in the case of Bombay Steam Navigation Co. (1963) (P) Ltd. vs. CIT (1965) 56 ITR 52 (SC), as well as the decision of Gujarat High Court in the case of CIT vs. Rajkot S.O. & B. Merchants Assn. Ltd. (1975) 101 ITR 748 (Guj). The assessee appealed and the learned first appellate authority upheld the action of the AO for the reasons given in detail in the impugned order. Aggrieved, the assessee has filed the second appeal before me.

(3.)P. C. Jain, Chartered Accountant, the learned representative of the assessee, submitted that the point in dispute involves the interpretation of s. 24(1)(vi). It was submitted that the Dy. CIT(A) in the assessment year under consideration has adjudicated the issue against the assessee by upholding the action of the AO in disallowing the claim of interest paid to the Estate Officer on the balance instalments in relation to the property whose income is being offered by the assessee for taxation under the head "income from house property". It was submitted that, however, the CIT(A) in assessee's own case for asst. yr. 1992-93 has adjudicated this issue in favour of the assessee and has allowed deduction of similar amount of interest in the asst. yr. 1992-93. Jain referred to the definition of interest given in s. 2(28A) and submitted that in the definition it is mentioned "interest" means "interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised". From the said definition, Jain submitted that with regard to the instalments payable to the Estate Officer, the assessee has incurred a debt and any interest paid in relation to that debt should be allowable under s. 24(1)(vi) and should be deemed as interest paid on borrowings for the purpose of acquisition of the commercial site over which construction was made by the assessee along with the other co-owners and the property was given on rent and the assessee was showing his share of rental income as income under the head 'house property'. Accordingly, it was pleaded that the interest payable to the Estate Officer was a legitimate allowable deduction. Jain further relied on Board's Circular No. 471 issued from F. No. 207/27/85-IT(A-II) dt. 15th October, 1986 for the proposition that when flats are acquired by an allottee under the self-financing scheme of the Delhi Development Authority, it tantamounts to purchase and it is also construction by the DDA on behalf of the allottee. Drawing analogy from this, Jain submitted that the money payable to the Estate Officer can be construed as the money spent on behalf of the assessee for acquiring the commercial site over which construction was carried on by the assessee along with other co-owners and as such any interest paid was an allowable deduction under s. 24(1)(vi) which reads as under :
"Sec. 24(1). - Income chargeable under the head "income from house property shall, subject to the provisions of sub-s. (2), be computed after making the following deductions, namely :

(vi) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital."

Jain submitted that the word used is capital borrowed and not money borrowed and capital is a much wider term than money. Jain then referred to the meaning assigned to the word "capital" in the Oxford Dictionary, Webster New 20th Century Dictionary and Law Lexicon and also the decision of the Hon'ble Supreme Court in the case of Lohia Machines Ltd. & Anr. vs. Union of India (1985) 152 ITR 308 (SC), and submitted that interest paid on balance instalment was, in fact, the interest paid on capital which was used by the assessee for acquiring the commercial site over which construction was subsequently raised and the property was given on rent to earn income assessable under the head 'income from house property'. Jain further relied on the decision of Hon'ble Supreme Court in the case of CIT vs. Poddar Cements (P) Ltd. (1997) 92 Taxman 541 (SC), for the proposition that for the purpose of s. 22, owner is a person who is entitled to receive income in his own right and as such where a property is handed over to a purchaser to enjoy fruits of that property, the purchaser is to be treated as owner of that property for the purpose of s. 22 even though no registered document as required under s. 54 of the Transfer of Property Act or Registration Act are executed. Drawing support from these observations, Jain submitted that the assessee alongwith the co-owner has, in fact, become owner of this property and as such the balance of instalment money payable to the Estate Officer along with interest was a debt incurred in relation to this property and any interest paid in relation to this property was an allowable deduction under s. 24(1)(vi).