The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that Section 24(b) does not mandate possession of the property to claim a deduction of interest on a housing loan.
The assessee who is a lawyer by profession had e-filed his return of income for A.Y. 2015-16 on 31.03.2017, declaring a total income of Rs.1,19,68,190/-. Subsequently, the case of the assessee was selected for scrutiny assessment.
During the course of the assessment proceedings, it was observed by the A.O that the assessee had under the head “Income from House property” claimed deduction of interest paid on borrowed capital of Rs. 2 lac under Sec. 24(b) of the Act. On being queried, it was submitted by the assessee that the aforesaid claim for deduction of interest pertained to the funds which were borrowed by him for purchasing a residential property. However, the A.O taking note of the fact that the assessee had not taken possession of the aforementioned property in question, thus, disallowed his aforesaid claim for deduction of interest u/s 24(b) of the Act. Accordingly, the A.O vide his order passed u/s 143(3) of the Act, dated 27.12.2017 assessed the income of the assessee at Rs.1,21,68,190/-.
Aggrieved, the assessee assailed the assessment order before the CIT(A). However, the CIT(A) not finding favor with the contentions advanced by the assessee upheld the disallowance of the assessee’s claim for deduction u/s 24(b) of the Act.
The Mumbai Tribunal led by M.Balaganesh, AM. & Ravish Sood, JM held that as far as the determination of the annual lettable value of a property is concerned, Section 22 read with Section 23 depends on the ownership of the property, irrespective of whether the assessee has taken possession of the same or not.
Further, as per the literal interpretation of Section 24(b), there is no bar on claiming a deduction of interest payable on a loan taken for purchasing a residential property, even if the possession of the same might not have been vested with him. Thus, the interest that was admittedly paid on the capital borrowed for acquiring the property will be allowed under Section 24(b) even if the assessee has not yet acquired possession of the property. The appeal filed by the assessee was allowed.
Abeezar Faizullabhoy (C/o Nanubhai Desai & Co.) vs. Commissioner Of Income Tax (Appeals)
Decision in favour of: AssesseeIN THE ITAT BOMBAY BENCH ‘A’