1. By this appeal the assessee challenges the disallowance of interest of Rs. 12,664 on loans taken from Sri Sriniwas & Sons and Smt.
Parmeshwari Devi.
2. The ITO did not allow this interest because the loans were taken in the past in order to pay Income-tax. He had disallowed such interest in the assessment year 1974-75 also. The said disallowance was upheld by this Tribunal on second appeal. For this reason the AAC held that the ITO was justified in making the disallowance in the present case also.
3. The authorised representative for the assessee argued that Under Section 80V of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') the assessee is entitled to the deduction of the said interest. He further submitted that this section was introduced by the Taxation Laws (Amendment) Act, 1975 w.e.f. 1-4-1976 and as such could not be considered by the Tribunal in the appeal for the earlier assessment year. So he contended that in view of the change in law, the assessee is entitled to the deduction claimed. Opposing this contention, the departmental representative contended that in order to take the benefit of Section 80V of the Act, the loans on which interest was paid should be one taken in the previous year relevant to the assessment year.
4. We have carefully considered the contentions of the authorised representatives for the parties. Section 80V of the Act was inserted w.e.f. 1-4-76 by the Taxation Laws (Amendment) Act, 1975. So if this section provides deduction of interest as claimed by the assessee, the earlier order of this Tribunal for the earlier year cannot be a bar in allowing such deduction.
In computing the total income of the 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.
The section requires that the interest must be paid in the previous year relevant to the assessment year under consideration and that it must be paid on money borrowed for the payment of any tax due under the Act. There is nothing in this section that the loans were to be taken in the previous year relevant to the assessment year under consideration. It is not disputed by the authorities below that in the instant case the loan was taken for the payment of income-tax under the Act and that the interest was paid in the previous year relevant to the assessment year under consideration. So, in our opinion, the assessee was entitled to the deduction of the interest claimed Under Section 80V of the Act. In setting aside the orders of the authorities below we direct the ITO to allow the deduction of interest of Rs. 12,664 as claimed by the assessee.