The Income Tax Appellate Tribunal (ITAT), Delhi held that the Charitable trust is not eligible for standard deduction at the rate of 30% u/s 24 (a) of the Income Tax Act, out of the rental income chargeable to tax in the hands of the assessee.
The assessee is a charitable trust, filed its return of income having an excess of expenditure over income by Rupees 1 407083/–. The assessment under section 143 (3) of the income tax was passed by the income tax officer (exemption), as assessing Nil income.
The assessing officer noted that assessee is deriving income from rent of Rs 9 78600/– and has claimed a deduction at the rate of 30% amount into Rs 2 93580/– and the net rental income is been shown at Rs 6 85020/–.
The AO noted that assessee is registered under section 12 AA, accordingly, claiming the benefit of section 11 of the income tax act so the income was to be computed on commercial principle as per the provisions of sections 11 and 12 of the act.
The Assessee was therefore not entitled to claim standard deduction under section 24 (a) of the act as the assessee has already claimed all the capital expenditure at the time of acquiring/construction of the property.
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.
While dismissing the petition the bench comprising of Judicial Member, K.N Chary and Accountant Member, Prashant Maharshi states that assessee trust is not eligible for standard deduction at the rate of 30% u/s 24 (a) of the act, out of the rental income chargeable to tax in the hands of the assessee.
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