T.A. BUKTE, J.M. This appeal is filed by Revenue against order of AAC of IT, Thane, dt. 30th March, 1984 on only ground that AAC has erred in allowing deduction of interest of Rs. 22,436 under s. 24(1)(vi) of IT Act, 1961 from income from property. Revenue's grievance is that assessee has failed to prove utilisation of loans, with reference to construction of house property in question. nexus between borrowings and investments in construction of property is not established beyond doubt. Hence Department has come in appeal. In fact, assessee has claimed deduction of interest of Rs. 38,242 on ground that he paid said interest towards loans raised for constructing house property. Details of said payment of interest are as follows: I.O.B. a/c Rs. 6,100 I.O.B. C/C a/c Rs. 1,119 Bank of Maharashtra loan a/c Rs. 21,001 N.U. Tawale Rs. 750 Trimurti Bank Rs. 9,270 -------------- Rs. 38,240 assessee owns commercial building named Laxmi Chambers on Laxmi Road in Pune. assessee has worked out income from this property, i.e. Laxmi Chambers, and claimed deduction of interest. assessee also received interest of Rs. 15,806. Details of receipt of interest by assessee are follows: Gyanprobodhini Rs. 80 Gold Bond Rs. 351 Bank of Maharashtra Interest on F.D. Rs. 15,375 ----------------- Rs. 15,806 Transferred to Laxmi Chambers Rs. 22,436 --------------- Rs. 38,242 As assessee has claimed deduction of interest of Rs. 22,436 against property income and therefore, he was called upon to prove said payment of interest in respect of investments made in Laxmi Chambers. assessee explained that all loans were raised for repayment of original loan which was borrowed for construction of Laxmi Chambers. assessee tried to take support of Circular No. 1 of 1951 dt. 25th Jan., 1951 of CBDT according to which Circular interest paid on second borrowings for repayment of original loans would be allowed as deduction. ITO made certain queries from assessee and observed that assessee was not able to furnish information regarding original loans and second borrowings used for repayment of original loans. He held that it will be necessary to find out from records correct position of original loans and utilisation of loans on which assessee has paid interest. ITO went through record of Wealth Tax and found that construction of Laxmi Chambers was completed in year 1963. second borrowings were somewhere in 1971. assessee utilised loan of Rs. 2,50,000 borrowed on 8th Nov., 1967 of Indian Overseas Bank. assessee took loan from Bank of Maharashtra in December, 1977 and loan from Trimurti Co-op. Bank in February, 1979. These two loans were also second borrowings. assessee raised total loans of Rs. 3,27,075 in asst. yr. 1964-65. cost of construction is Rs. 2,75,000. According to ITO three loans as described above are not second borrowings and therefore, assessee's claim of interest payment on loans mentioned regarding, (1) I.O.B. C/C loan a/c, (2) Bank of Maharashtra loan a/c, and (3) Trimurti Co-op. Bank a/c, cannot be accepted. ITO further held that IOB C/C loan account and loan from N.U. Tawale are also neither original loans nor second borrowing and hence interest paid on these loans cannot be allowed. It is ITO's own version that construction of Laxmi Chambers is completed in 1963 by raising loans. assessee could not have repaid said loans immediately unless and until he raised second loans from IOB on 8th Nov., 1967 and from other banks thereafter. It is unacceptable that why these three borrowings, i.e. IOB building loan, Bank of Maharashtra and Trimurti Co-op. Bank cannot be second borrowings for repayment of first loan. ITO has not given any reasons to arrive to such conclusion that these loans cannot be second borrowings for repayment of first loan. Similar is case in respect of IOB account and N.U. Tawale account. assessee is receiving income from property and thus claimed deduction of interest paid by him on loans invested in construction of said property. assessee stated in his letter dt. 16th Dec., 1982 that all second borrowings were for repayment of original loan. fact is that construction of Laxmi Chambers was completed during 1964-65, out of borrowings from I.O.B and private parties. Subsequent loans were raised to repay original loan. AAC of IT and Tribunal have held that payment of interest of Rs. 25,289 was clearly in respect of repayment of loan and hence same was allowable under s. 24(1)(vi) of Act by its order dt. 20th Oct., 1978. AAC noted that most of subsequent loans taken were utilised for repayment of old loans and only small fraction of fresh loans was utilised either by way of expenses or for running assessee's profession. This process continued upto asst. yr. 1978-79 when fresh loan of Rs. 1,36,717 was obtained from Bank of Maharashtra at higher rate of interest and out of said loan assessee utilised amount of Rs. 1,23,000 in repayment of old loans. balance was used for purpose of carrying on profession. same position continued till asst. yr. 1980-81, i.e. assessment year under appeal. assessee borrowed sum of Rs. 1,03,271 and used same for repayment of old loans of private parties. Thus it becomes clear that assessee has utilised major part of subsequent loans for repayment of old loans and minor part for running his profession or for investing same in banks. assessee paid interest of Rs. 38,242 for relevant year under consideration and received interest of Rs. 15,806. Thus difference between interest paid and interest received, is Rs. 22,436 and assessee has claimed this amount as deduction from income from property under s. 24(1)(vi) of Act. There is no doubt that assessee has either utilised small portion of loans of Rs. 13,717 out of Rs. 1,36,717 for carrying on profession and payment of interest on this amount is deductible while computing income from profession. assessee has filed balance sheet every year. loans and investments have been shown in balance sheet. Therefore, assessee claimed to allow deduction of entire interest of Rs. 38,242 and claimed to treat interest received of Rs. 15,806 as income from other sources and further claimed difference between interest paid and received to be allowed as deduction against property income. There is no doubt that interest is deductible from property income by virtue of CBDT Circular No. 1 of 1951. ITO has not established how assessee has not utilised fresh loans for repayment of old loans. assessee has fairly admitted that portion of fresh loans has been used for running profession or for making investment in Banks. Such portion of loan is about Rs. 13,717 only. AAC has taken correct view to allow deduction of interest of Rs. 22,436 and to allow balance of payment of interest as deduction from professional income. In our view, view taken by AAC does not appear improper or unreasonable. However, we wish to make point clear in sense that interest on amount of Rs. 13,717 be computed and allowed against professional income. We do not desire to interfere with finding of AAC in regard to payment of interest of Rs. 22,436 held by him as allowable deduction. assessee in support of his contention to allow payment of interest by w y of deduction against property income has placed reliance on decision of Andhra Pradesh High Court in case of CIT, A.P. vs. Gopikrishna Muralidhar (1963) 47 ITR 469 (AP). Andhra Pradesh High Gopikrishna Muralidhar (1963) 47 ITR 469 (AP). Andhra Pradesh High Court has held in that case that as amounts were borrowed for purpose of business of family and as no particular sum purporting to be borrowed on behalf of business was spent for household expenses and family was entitled to withdraw from capital supplied by it thereby depleting capital, fact that part of amounts borrowed was later on used for personal expenses did not deprive assessee of benefit of deduction of entire interest paid on borrowed capital under s. 10(2)(iii) of IT Act, 1922 and part of interest could not, therefore, be disallowed. There is no doubt that this ruling is applicable to assessee's claim, but on admission of assessee himself that he has utilised part of loan for running his profession and therefore, we have directed to compute interest on loan of Rs. 13,717 against professional income. assessee has also relied upon ruling of Supreme Court in case of L. Hazari Mal Kuthiala vs. ITO (1961) 41 ITR 12 (SC). That ruling is regarding jurisdiction of CIT to frame assessment by particular ITO. However, this ruling does not help assessee. Against above facts on record and case of assessee, ld. departmental representative Shri A.P. Walvekar has contended that if any interest is to be allowed then assessee is eligible to get deduction of Rs. 6,100 only and nothing more than that. Shri Walvekar's main contention is that assessee has failed to establish that he has utilised subsequent loans for repayment of old loans and there is no nexus between subsequent loans and repayment of old loans. Shri Walvekar's contention was that it was for assessee to furnish particulars regarding fresh loan and repayment of old loan and he has failed and therefore, ITO has rightly refused to allow deduction of payment of interest. assessee in his rejoinder has contended that he has purchased property by raising loans from Bank, if his nil income is taken into account, than his claim to allow repayment of interest stands on right footing. assessee has also relied upon decision of Bombay High Court in CIT vs. Smt. Archana R. Dhanwatay (1981) 24 CTR (Bom) 142: (1982) 136 ITR 355 (Bom) on ground that ITO is required to allow deduction under head to which it pertains. He has also cited decision of Madras High Court in CIT vs. Coimbatore Salem Transport (P) Ltd. (1966) 61 ITR 480 (Mad) on point of borrowing loans from others and paying interest. He has pointed out that there is nothing to prevent him to advance loans to others without any interest out of business prudency. We have examined orders of authorities below. We have gone through compilation filed by assessees. We have also examined facts on record. We are of opinion that view taken by AAC in allowing payment of interest does not require to be reversed. There is no dispute that assessee made repayment of interest. dispute is whether repayment of interest made on subsequent loans is to pay old loans. There is no evidence that assessee did not pay old loans from subsequent loans. If such evidence would have been brought on record by ITO then there would have been good case for him to disallow deduction of payment of interest on subsequent loans. Merely saying that there is no nexus between subsequent loans and interest payment made on them to discharge loans is not sufficient. If ITO's version is to be accepted in this respect, there is no reason why assessee's version also need not be accepted that he has raised fresh loans to discharge old loans. After all he had nothing in beginning when he had started acquiring immovable property. In result, Revenue fails and appeal is dismissed. *** INCOME TAX OFFICER v. C.H. CHASTWE