The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) has allowed the carry forward of loss of rental income against other income as the interest on house loan was deductible.
The assessee, Sameer Kishore Kotecha is an individual and filed his return and revised return of income after setting off and carrying forward of loss from house property. The revised return of income filed by the assessee was processed under section 143(1) of the Income Tax Act, whereby the total income of the assessee was computed and set off of current year loss was restricted to Rs.2 lakh and carry forward of balance loss under the head ‘income from house property’ was denied.
He filed an application, under section 154 of the Act, seeking rectification of intimation issued under section 143(1) of the Income Tax Act on the basis that interest under section 24(b) of the Income Tax Act was allowed only to the extent of Rs.2 lakh, however, the assessee had no other self-occupied property for the year under consideration. The Assessing Officer, dismissed the rectification application filed by the assessee.
Madhur Agarwal on behalf of the assessee submitted that the restriction on the allowability of interest payable on capital borrowed under 2nd proviso to section 24(b) of the Income Tax Act was only applicable in case of residential property, and in the present case the loan was taken by the assessee in respect of the commercial property. He further submitted that in assessment years 2015–16 and 2017–18, the Revenue has allowed the claim of deduction of interest under section 24(b) of the Income Tax Act.
Purnesh Gururani, on behalf of the revenue, relied upon the orders passed by the lower authorities and submitted that since the assessee had only one property the same should be considered as self-occupied.
Sandeep Singh Karhail (Judicial Member) and Gagan Goyal, (Accountant Member) observed that “as per the agreement the said property can only be used for the purpose of setting up the IT office as per the IT Park Policy of the Government of Maharashtra. It is evident that the property in respect of which the assessee claimed interest under section 24(b) of the Income Tax Act is only a commercial property, and therefore the restriction on deduction as provided in 2 and proviso to section 24(b) of the Income Tax Act shall not be applicable. Therefore, we are of the considered view that the AO has erred in restricting the deduction of interest paid on the loan to Rs.2 lakh vide intimation issued under section 143(1) of the Income Tax Act.”
The Bench allowed the appeal as the assessee was entitled to claim the entire interest paid during the year on loan for acquiring the above property, and held that the amount of loss under the head ‘income from house property’, which was not set off against the income under the other head of income be allowed to be carried forward as per provisions of section 71B of the Income Tax Act.
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