Interest u/s 24(b) of Income Tax Act allowable when Charging for Income Receivable and Income is Approved: ITAT [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that the interest under Section 24(b) of the Income Tax Act 1961 which allows deduction of interest on home loan from the taxable income would be allowable when the charging of Income receivable and income was approved.

The assessee company, Mansha Textiles Pvt. Ltd filed its original return of income for A.Y. 2011-12 on 04.02.2013 declaring total income at Rs. NIL. Thereafter, notice under Section 148 of the Income Tax Act was issued on 13.03.2015. Subsequently, income was assessed under Section 143(3) read with Section 147 of the Income Tax Act on 27.10.2015 determining total income.

Thereafter, the case was reopened under Section 147 of the Income Tax Act by issuing notice under Section 148 dated 3.03.2018 after recording the reasons for doing so and the same was served to the assessee on 30.03.2018. In response to the said notice the assessee filed its return of income on 01.12.2018 declaring total income.

Notice under Section 143(2) was issued on 03.12.2018. In response to these statutory notices the assessee filed a balance sheet along with its annexures. The Assessing Officer called for a copy of lease deed and working of interest payable to Noida Authority.

After taking into consideration the assessee’s submissions and the evidence the Assessing Officer observed that the lease deed was unsigned by both lessor and lessee and the assessee did not proof with the evidence related to interest actually paid to Noida Authority.

The Assessing Officer, therefore, held that the assessee is entitled only for deduction under Section 24A of the Income Tax Act that was deduction at 30% on rent income received and denied the claim of deduction under Section 24(b) of the Act and thus made addition.

Urvashi Shodhan, on behalf of the assessee submitted that there was a dispute between the Noida Authority and the assessee and therefore, the Noida Authority had not given any reply or details but the fact remains that the Income Tax Department/Revenue had determined this is rental income receivable, therefore, interest should have been allowed.

He also contended that the charging for income receivables thereby income approve then the interest had to be allowed.

Ashesh R Rewar, on behalf of the revenue submitted that Section 43(B) of the Income Tax Act was not applicable in the present case as the assessee claimed deduction under Section 24(b) of the Income Tax Act on the interest paid on loan availed against the rented property taken on lease from the Noida Authority but the lease deed was unsigned and therefore, the Commissioner of Income Tax Act (CIT(A)) as well as the Assessing Officer was right in disallowance the said claim of the assessee.

A Single Bench of Suchitra Kamble, (JUDICIAL MEMBER) observed that, “On merit, the assessee claim deduction under Section 24(b) on the interest paid on the loan availed against the rented property taken on lease from Noida Authority. The Noida Authority and the assessee had certain disputes but it is undisputed fact that the assessee has taken loan for the said property and was liable to pay interest to Noida Authority.”

The Bench allowed the appeal filed by the assessee holding that since the Assessing Officer had assessed the income receivables from the assessee then the said income receivables was supposed to be in respect of loan taken for the property from Noida Authority for which the assessee was paying the interest.

To Read the full text of the Order CLICK HERE

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