An assessee has taken a Mortgage Loan(as recorded by bank)against his house property form a bank amounting to Rs. 1 crore, out of which Bank paid Rs. 50 Lacs for paying of his existing House property loan and remaining 50 Lacs has been given to him in cash.
Bank has issued a interest certificate mentioning that Rs. 500000 has been paid by assessee during the year. Noting has been mentioned that this interest is eligible for deduction u/s 24b.
The purpose of taking this mortgage loan that assessee wanted to pay his existing housing loan and remaining amount for his business expansion.
However, Bank has taken it as fully mortgage loan and they are denying to issue any interest certificate u/s 24b for the protion of the loan amount which was used to pay off his existing housing loan.
Now please suggest me that where assessee will get deduction of the interest paid and how and on which amount?
This is a Debatable issue. As per section 24(b) the deduction is available only for capital borrowed for the purchase/construction etc of the property. but the last explanation given in section 24 states that a new loan which is taken for the purpose of repaying the capital borrowed earlier is also eligible. It is not mentioned that the new loan should be a housing loan. Please refer to Circular no. 28[F No.8/8/69-IT(A-I)] dated 20-8-1969. But as per this circular the new loan should be taken merely to repay the original loan.
What should I do now as neither assessee is eligible for taking interest deduction u/s 24b nor he can take this interest as business expenditure because he is not showing this loan is his business books.He made FD for the the remaining amount and after maturity he repaid his another housing loan. Bank officials are denying to give any certificate u/s 24b then how it will be possible for us to take deduction of the loan amount?