2020 (7) TMI 66 - AT - Income Tax

Loss from house property on account of loan borrowed on capital for construction of house.- disallowance of interest amount paid on housing loan and claimed as a deduction under section 24 (b) - assessee explained that that renovation in respect of a residential house was made by parents of the assessee - Assessee is merely a co-borrower of the loan granted by the bank - as per assessee family settlement amongst the family members of the assessee and because of this the appellant is the de facto owner of a portion of the property for which home loan was utilized for renovation and repair - HELD THAT - According to us the property west in the assessee with effect from 8 April 2014. The assessee has taken a liability to pay the amount borrowed for the purpose of renovation of that house property to the banker. He was also one of the borrowers in that particular loan Case are very straight that assessee is owner of the 1/6 portion of the impugned property for renovation of which the amount was borrowed by the parents and other applicant including the assessee. Any interest arising there on requires to be granted as deduction to the assessee under the provisions of section 24 (b) of the income tax act as assessee is the owner of the property. CIT A merely stated that as name of the assessee has not been entered into the main super records he is not the owner of the property. There is a definite clause in the family settlement deed that each of the co-owner can get their names entered into the records of the municipal Corporation. Merely because of the fact that such act has not been carried out by the assessee, according to us he cannot be held to be not the owner of the property - family settlement deed also cannot be held to be a colorable device without examining the real motive of the deed. There are no conditions except the divisions of the property in the family settlement deed therefore, it cannot be inferred that it is executed with an ulterior motive - it is a simple partition of the property by the parents in four sons and themselves. Accordingly, we reverse the orders of the lower authorities and direct them to granted deduction under section 24 (b) of the act to the assessee of the interest amount paid of ₹ 2 lakhs on housing loan. Accordingly, all the grounds of the appeal, which are related to only this disallowance, are allowed. - Decided in favour of assessee.

Summary

Issues:
Claim of deduction under section 24(b) of The Income Tax Act 1961 for interest amount paid on housing loan disallowed by assessing officer.

Analysis:
The appeal was filed by the assessee against the order of The Commissioner Of Income Tax (Appeals) confirming the addition of ?2 lakhs being the disallowance of interest amount paid on housing loan claimed as a deduction under section 24(b) of The Income Tax Act 1961. The assessee, deriving income from retail trading, had filed his return showing total income of ?527460. A search under section 132 of the Act revealed that the assessee claimed loss from house property due to a loan borrowed for construction. The assessing officer disallowed the interest deduction as the property was owned by the assessee's parents, and the assessee was merely a co-borrower. The CIT - A rejected the claim, stating the assessee was not the legal owner of the property as per a family settlement. The Tribunal noted the family settlement dated 8/4/2014, where the assessee acquired a 1/6th share in the property and was liable to pay the borrowed amount for renovation. The Tribunal found no colorable device in the settlement and held the assessee as the owner of the property, reversing the lower authorities' decision and allowing the deduction of ?2 lakhs on housing loan interest.

The crucial point of contention was whether the family settlement was genuine and conferred ownership rights to the assessee. The Tribunal found that the family settlement deed clearly divided the property among family members, including the assessee, and stipulated that each member could get their name recorded in municipal records. The Tribunal disagreed with the CIT - A's conclusion that the assessee was not the owner of the property, emphasizing that the assessee had a 1/6th share in the property and was a borrower in the loan for renovation. The Tribunal highlighted that the absence of the assessee's name in municipal records did not negate his ownership. The Tribunal concluded that the family settlement was a simple partition of the property and not a colorable device, directing the authorities to grant the deduction under section 24(b) to the assessee for the interest amount paid on the housing loan.

In summary, the Tribunal allowed the appeal, emphasizing the assessee's ownership rights established through the family settlement and directing the deduction of the interest amount paid on the housing loan.