The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the provisions of section 24(a) of the Income Tax Act, 1961 relating to standard deduction on home loan interest shall be applicable to a charitable trust.
Section 24 of the Income Tax Act lets homeowners claim a deduction of up to Rs. 2 lakhs (Rs. 1,50,000 if you are filing returns for last financial year) on their home loan interest if the owner or his family reside in the house property. The entire interest is waived off as a deduction when the house is on rent.
In the instant case, the assessee, a Charitable Trust, having income under the heads Income from House Property and Income from Other Sources. An intimation under section 143(1) of the Act was issued on 03-03-2017 by Deputy Commissioner of Income Tax CPC, Bangalore and a demand of Rs. 1,24,770/- was imposed on account of disallowance of deduction claimed by the assessee u/s 24 for Rs. 12,61,080/- being 30% of the Income from House property of Rs. 42,03,600/-.
Before the authorities, the assessee submitted that the provisions of section 24 are applicable to assessee and deduction u/s 24 is to be allowed.
Relying on a catena of decisions, ITAT Vice-President Rajpal Yadav and Accountant Member Waseem Ahmed overruled the order of the CIT (A) confirming the order of the AO denying the deduction under section 24 of the Act after placing reliance on the order of Chennai tribunal in case of of Anjuman-E-Himayath-E-Islam ITA No. 2271 (MDS) of 2014 for A.Y.2009-10.
The bench found that the above order was quashed by the Madras High Court in T.C.A No. 46 wherein it was held that “Income from property should be computed as per sections 22 to 27 of the Act and the income from business have to be computed under sections 28 and 44 of the Act. Such computed income is exempted from tax under sections 11 and 13, if 85% of the same is spent on the charitable objects. Once the income is computed and determined 85% of such computed income should be utilized for charitable objects.”
Citing the above decision, the two-member bench allowed the appeal of the assessee.
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