Housing Loan and Interest Paid thereon for Construction of Rented House Eligible for Deduction u/s 2(24)(b) of Income Tax Act: ITAT [Read Order]

Housing Loan - Interest - Rented House - Construction of Rented House - Deduction - Income Tax Act - Income Tax - ITAT - taxscan

Income Tax Appellate Tribunal (ITAT) Kolkata Bench ruled that the housing loan and interest paid for construction of the rented house is eligible for Deduction under the section 2(24)(b) of Income Tax Act, 1961.

The appeal of the assessee for the A.Y. 2009- 10 was against the order passed under section 250 of the Income-tax Act by the ld. Commissioner of Income Tax (Appeals) [CIT(A)] (National Faceless Appeal Centre).

Fact is that the assessee is an individual, carrying on business as C & F agent in the name of M/s. Fresnius Karl India Pvt. Ltd. (M/s. FKIPL) declared income at Loss of  Rs.97,160.

The Assessing Officer (AO) considered the submissions made by the assessee and assessed the income at Rs. 5,83,860 after making various additions.

Aggrieved by the order of the AO, assessee preferred appeal before CIT(A). Further the decision was not in favour of assessee, preferred appeal before the ITAT.

The bench noted that the assessee had requested that Rs. 4,62,710 in interest be disallowed. The AO denied the assessee’s claim for the aforementioned expense. The assessee had obtained various credit options in addition to a house loan from Bank of India.

Additionally, the loan was taken in order to build a house. The aforementioned property has been rented out. In order to demonstrate to the lower authorities that the loans were used to build rental property, as allowed by section 2(24)(b) of the Income Tax Act, the assessee has submitted documented proof.

Even though the assessee paid a total of Rs. 6,46,390 in interest on all loans, including the house loan, the AO only permitted to the extent of Rs. 1,83,680. However, taking into account the fact that the assessee obtained a mortgage and that the interest paid on it is deductible from rental income under section 2(24)(b) of the Income Tax Act.

The Manishborad (Accountant Member) bench overturned the CIT(A) decision and determined that the assessee is entitled to a deduction for interest paid on a loan of Rs. 4,62,710 under section 2(24)(b) of the Income Tax Act.

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