2024 (9) TMI 263 - AT - Income Tax

LTCG - deduction u/s. 54 - CIT(A) has taken the cost of new residential house as a sum of only the stamp duty charged for the purchase of the said property instead of actual purchase price - HELD THAT - We are of the opinion that the Ld.CIT(A) on the mistaken ground had disallowed the claim of deduction u/s. 54 amounting to Rs. 2,82,40,000/- treating Rs. 1,03,60,000/- as the cost of new asset which is in fact only the stamp duty paid by the assessee. Therefore, the entire purchase cost amounting to Rs. 19,53,60,000/- should be allowed as deduction u/s. 54 of the IT Act. However, this deduction may be restricted to the sale proceeds i.e. Rs. 3,86,00,000/-. Disallowance of interest on housing loan claimed u/s. 24 - CIT(A) on the mistaken ground that housing loan has been taken for the purpose of renewal of the same property which is already under rent had disallowed the entire claim of deduction u/s. 54 - We are of the opinion that assessee had received rent amounting to Rs. 4,74,69,381/- during the F.Y. 2020-21 relevant for the A.Y. 2021-22. Therefore, the house property is let out during the year and there is no maximum limit on the deduction for interest on borrowed capital. In the instant case, as the assessee has produced the bank certificate showing payment of interest towards loan, which the assessee was claiming in the preceding years and allowed by the IT department also. We find no merits in disallowing the deduction paid towards interest on housing loan u/s. 24

Summary

Issues:
1. Disallowance of deduction u/s. 54 of the IT Act.
2. Disallowance of interest on housing loan claimed u/s. 24 of the IT Act.

Analysis:

Issue 1: Disallowance of deduction u/s. 54 of the IT Act:
The appeal was against the CIT(A)/NFAC order concerning the computation of deduction u/s 54 of the IT Act for AY 2021-22. The assessee contended that the CIT(A) erred in determining the available deduction by mistaking the cost of the new residential house. The actual cost, as per the purchase deed, was Rs. 18,50,00,000, while the CIT(A) considered it as Rs. 1,03,60,000. The discrepancy arose from the stamp duty charge. The Tribunal held that the entire purchase cost of Rs. 19,53,60,000 should be allowed as a deduction u/s 54 but restricted to the sale proceeds of Rs. 3,86,00,000.

Issue 2: Disallowance of interest on housing loan claimed u/s. 24 of the IT Act:
The second issue pertained to the disallowance of interest on a housing loan claimed u/s 24 of the IT Act. The CIT(A) rejected the claim as the loan was considered a simple loan, not a home loan, and no supporting documents were provided. However, the assessee had produced an interest certificate from Kotak Mahindra Bank, certifying the payment of Rs. 48,26,105 towards the loan. The Tribunal noted that the property was rented out during the relevant year, and there was no maximum limit on the deduction for interest on borrowed capital. As the interest payment was supported by bank certificates and had been claimed in preceding years, the disallowance was deemed unjustified.

In conclusion, the Tribunal allowed the appeal filed by the assessee, overturning the disallowances made by the CIT(A) and directing the proper computation of deductions under sections 54 and 24 of the IT Act.