ITAT Partially Allows Deduction of Interest paid on Home Loan since Assessee is Co-Owner of the Property [Read Order]

While partly allowing the appeal filed by the assessee Mumbai bench of Income Tax Appellate Tribunal (ITAT) recently held that interest paid on home loan is partly allowable since the assessee is not the absolute owner but a co-owner of the property.

The assessee in the instant case is a director of a company M/s Dev Sharda Developers Pvt. Ltd has filed her return of income for the relevant assessment year declared a total income of Rs. 1,25,821.

During the assessment proceedings, the Assessing Officer (AO) noticed that assessee has purchased a flat for a consideration of Rs.42 lakhs and has shown in her balance sheet under the head “Flat at Kent-2001”. Further, the AO noted that the assessee claimed the deduction of Rs. 1,50,000 on account of interest paid on the home loan. But the AO denied assessee’s claim and simultaneously made an addition of the said amount. He was of the view that the interest amount has already been included in the return which was the assessee filed earlier and the assessee has failed to show the source of the fund which she invested in the property.

But the assessee contended that the investment in the property was made by raising a loan from a bank and also submitted the proof documents of the payment of interest on the home loan and the assessee was not the real owner of the property.

On appeal CIT (A) also confirmed the addition made by the AO.

Aggrieved by the assessee was on appeal before the tribunal. After considering the rival submissions of both the parties the tribunal bench comprising of Judicial Member Ravish Sood and Vice President P.K.Bansal observed that while perusing the material facts and records it is clear that the assessee has raised the loan from a bank and invested the same on the aforementioned property and she was the co-owner of the property. The bench further observed that the assessee has been paying interest also on the home loan, thus the lower authorities were wrongly concluded that the source of investment was unexplained. And the division bench concluded that deduction of interest paid on home loan is allowable even if the assessee is just only a co-owner of the property.