2022 (8) TMI 27 - AT - Income Tax

Rental income - Deduction u/s 24(b) - interest paid on the amount borrowed - HELD THAT - In this case it is a fact that as per the Loan document (sanction letter dated 07/03/2011) the loan has been borrowed for Flat No.12 and garage 12G which are different from the Flat No.11 for which the assessee has claimed deduction u/s.24(b) of the Act. The deduction u/s.24(b) is available for the property which has been acquired by borrowed capital and for the said property assessee has offered income from house property. In this case the impugned property is Flat No.11 but the Loan is for the Flat No.12 Garage No.12G which are different. Thus, the loan was not borrowed for the impugned Flat No.11. Assessee had claimed that the loan was used for making payment to the Tenants of Flat No.11, but mere oral recital does not hold good against the written document of loan which mentions Flat No.12 and garage 12G. - loan was not for the impugned Flat No.11, hence the assessee is not eligible for deduction u/s.24(b) of the Act for the interest paid on the amount borrowed from Reliance Home Finance. Also, the Flat No.11 was acquired in September 2001 by the assessee. The impugned loan was availed in 2011. Therefore, on this ground also the assessee is not eligible for deduction u/s.24(b) of the Act. Therefore, it is held that the assessee is not eligible for deduction u/s 24(b) of the Act. The Ld.Co-ordinate bench has held in the said order 2022 (7) TMI 1277 - ITAT PUNE that amount paid to the tenant was for bettering title. Hence the interest paid on it is not eligible for deduction u/s 24(b) of the Act. Respectfully following the said decision we hold that the assessee is not eligible for deduction u/s 24(b) of the act for the interest paid on the amount borrowed from Reliance Home Finance. Accordingly, grounds of appeal raised by the assessee are dismissed.

Summary

Issues:
1. Deduction of interest paid for acquiring possession of property.
2. Eligibility for deduction under section 24(b) of the Income Tax Act.

Analysis:
1. The appeal involved a dispute regarding the deduction of interest paid by the Assessee for acquiring possession of a property from a statutory tenant. The Assessee contended that the interest paid should be allowed as a deduction under section 24 of the Income Tax Act. The Assessee argued that the borrowed funds were utilized for acquiring possession of the property, making the interest payment allowable. However, the Commissioner of Income Tax (Appeals) and the assessing officer disallowed the claim. The Tribunal examined the facts and held that the loan was not borrowed for the specific property in question, as per the loan agreement. The Tribunal emphasized that the property for which deduction was claimed and the property mentioned in the loan document were different. Therefore, the Tribunal concluded that the Assessee was not eligible for the deduction of interest under section 24 of the Act.

2. The Tribunal referred to relevant legal provisions under section 24(b) of the Income Tax Act, which allow for a deduction of interest payable on borrowed capital for acquiring a property. The Tribunal highlighted that the loan in question was taken for a different property than the one for which the deduction was claimed. Citing precedents and a decision by the Hon'ble Punjab and Haryana High Court, the Tribunal held that the Assessee must have borrowed capital for the specific property to be eligible for the deduction. The Tribunal also noted a previous decision against the Assessee in a similar case. Based on these findings, the Tribunal dismissed the Assessee's appeal, ruling that the Assessee was not entitled to the deduction under section 24(b) of the Income Tax Act.

In conclusion, the Appellate Tribunal ITAT Pune, consisting of Shri S.S. Godara, Judicial Member, and Dr. Dipak P. Ripote, Accountant Member, dismissed the Assessee's appeal regarding the deduction of interest paid for acquiring possession of a property and upheld the decision of the lower authorities to disallow the claim under section 24(b) of the Income Tax Act for the Assessment Year 2014-15.