By Jagdish T. Punjabi | Prachi Parekh
Chartered Accountants | Devendra Jain
Advocate
2 Abeezar Faizullabhoy vs. CIT(A) [TS-859-ITAT-2021 (Mum)] A.Y.: 2015-16; Date of order: 1st September, 2021 Section 24
Claim for deduction of interest u/s 24(b) is allowable even though assessee had not got possession of the house property
FACTS
The assessee purchased a residential house vide a registered agreement dated 20th September, 2009 for a consideration of Rs. 1,60,89,250. For acquiring the property, the assessee took a loan on which interest of Rs. 2,69,842 was paid by him during the year under consideration. In the return of income the assessee claimed deduction of Rs. 2,00,000 u/s 24(b) which was declined by the A.O. on the ground that the assessee had not taken possession of the property in question.Aggrieved, the assessee preferred an appeal to the CIT(A) who confirmed the action of the A.O. Still aggrieved, the assessee preferred an appeal to the Tribunal.
HELD
The Tribunal on perusal of section 24(b) held that for claiming deduction of interest u/s 24(b) there is neither any such precondition nor an eligibility criterion prescribed that the assessee should have taken possession of the property purchased or acquired by him. The first and second provisos to section 24(b) only contemplate an innate upper limit of the amount of deduction qua properties referred to in section 23(2). These provisos by no means jeopardise the entitlement of the assessee to claim deduction of interest payable by him on capital borrowed for the purposes mentioned in the section, provided the property does not fall within the realm of section 23(2).
The view of the CIT(A), viz., that in the absence of any control / domain over the property in question the assessee would not be in receipt of any income from the same, therefore, the fact that allowing deduction u/s 24(b) qua the said property would be beyond comprehension was held by the Tribunal to be absolutely misconceived and divorced of any force of law. It held that the logic given by the CIT(A) for declining the claim for deduction militates against the mandate of sections 22 to 24.
The Tribunal further held that determination of annual value is dependent on the ‘ownership’ of the property, irrespective of the fact of whether or not the assessee has taken possession. As per the plain literal interpretation of section 24(b), there is no bar on an assessee to claim deduction of interest payable on a loan taken for purchasing a residential property, although the possession of the same might not have been vested with him.
The Tribunal set aside the order of the CIT(A) and directed the A.O. to allow the assessee’s claim for deduction of Rs. 2 lakh u/s 24(b).
