Disallowance of Excess Loan Interest: ITAT allows Full Deduction [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) allowed full deduction of loan interest claimed under Section 24 of the Income Tax Act,1961 by the assessee, despite the Assessing Officer ( AO )’s disallowance of the excess interest.

Bhaveshkumar Vinodbhai Patel, appellant-assessee, filed his e-return for the year on 12/03/2018, declaring an income of Rs.19,36,140/-. He claimed 50% of the loan interest on a rented property under Section 24 of the Act. However, the AO adjusted the income, allowing only 20% of the interest deduction, as the housing loan was sanctioned to five people.

Section 24 of the Act provides deductions for income from house property. It allows up to Rs. 2 lakh for interest on loans for property acquisition or improvement, a 30% standard deduction on the annual value, and deductions for municipal taxes paid. Losses from a rented property can be set off against other income, subject to conditions.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The assessee appealed against the order, raising several points. First, the assessee said the CIT(A) did not give a fair hearing before passing the order under Section 250. Second, the assessee claimed the CIT(A) was wrong in confirming the addition of Rs. 7,58,826/- due to disallowing excess interest on a loan from Kotak Bank. Lastly, the assessee asked to change or withdraw any grounds during the hearing.

The two member bench comprising Dr.BRR Kumar(Vice President) and Suchitra Kamble (Judicial Member) reviewed the case and found that the CIT(A) upheld the AO’s order due to the appellant’s failure to provide supporting details for the 50% claim. However, a similar issue in AY 2016-17 had been resolved in the appellant’s favor after examination, with the interest being allowed.

It was also noted that similar claims had been allowed in the subsequent year and that the appellant had made the required repayments. Based on this, the tribunal ruled that no disallowance was needed for the current year.

In short, the appeal filed by the assessee was allowed.

To Read the full text of the Order CLICK HERE

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