PADMALOCHANAN RADHAKRISHNAN,KOLKATA vs. A.C.I.T., CIRCLE - 62, KOLKATA, KOLKATA

The grounds raised by the assessee are as under:-

(1) For that on the facts and in the circumstances of the case, the ld. CIT(Appeals), NFAC grossly erred in denying the corrected figure of loss of Rs.6,59,639/- claimed under the head ‘Income from House Property’.

Brief facts of the case are that the assessee is in individual and earns major income from salary. Income of Rs.50,24,690/- declared in the e-return for A.Y. 2014-15 was filed by the Assessment Year: 2014-2015 Padmalochanan Radhakrishnan assessee on 31.07.2014. The case of the assessee was selected for scrutiny under CASS followed by serving of notice under section 143(2) of the Act. The ld. Assessing Officer while carrying out the assessment proceeding noticed that the assesese has claimed set off of interest on housing loan at Rs.8,17,358/- against the salary income. The said interest includes the interest paid on one property used for self-occupied purpose and other two properties given on rent. The ld. Assessing Officer firstly observed that provision of section 71(4) of the Act does not permit to adjust the loss of house property otherwise than for self- occupied purpose and the same was also not allowed since the assessee has not produced the interest certificate. The ld. Assessing Officer also held that the assessee is not entitled to set off the interest on house property not used for self-occupied purpose against the salary income. Thus the claim of set off of interest on loan in respect of house property at Rs.8,17,358/- was denied and similarly deduction under section 80TTA was also disallowed for want of evidence of interest income. Aggrieved, the assessee preferred appeal before the ld. CIT(Appeals) and made a detailed submission and partly succeeded. Aggrieved, the assessee is now in appeal before the Tribunal.

Ld. Counsel for the assessee referring to the written submission filed before the ld. CIT(Appeals) submitted that firstly ld. Assessing Officer failed to correctly apply the provisions of section 71 and sections 23 & 24 of the Income Tax Act and further prayed that an opportunity may be provided to place the Assessment Year: 2014-2015 Padmalochanan Radhakrishnan necessary documents in support of the claim of interest expenditure incurred towards purchase of house property before the ld. Assessing Officer for necessary verification.

On the other hand, ld. D.R. vehemently supported the order of lower authorities.

We have heard the ld. representatives and perused the relevant record placed before us. The first issue raised by the assessee for our consideration is with regard to the claim of set off of interest on borrowed capital for purchase of house property at Rs.8,17,358/- against the salary income earned during the year. The assessee owns three immovable properties of which two located at Medavakkam and Ratnam Nagar, both were given on rent and third property is self-occupied. Details of rent receipt and interest paid on the housing loan produced in the body of the assessment order at page 2, which reads as under:- (1) Property at Rent Received Rs.7500/- Medavakkam Less 30% i.e. Rs.2250/- Less: HBL Rs.5,37,208/- Loss Rs.5,31,958/- (2) Property at Rent Received Rs.8000/- Ratnam Nagar Less 30% i.e. Rs.2400/- Assessment Year: 2014-2015 Padmalochanan Radhakrishnan Less: HBL Rs.2,21,000/- Loss Rs.2,15,400/- (3) Property Rent Received NIL treated as self-occupied Less: HBL Rs.70,000/- Loss Rs.70,000/-

We further noticed that the ld. Assessing Officer has observed that the assessee is not permitted to adjust the house property loss except for the self-occupied property against other income. Provision of section 71 of the Act has a direct bearing on this issue and the same reads as under:-

On perusal of sub section (l), (2), (2A) & (3) of Section 71 of the Act, we notice that ‘Loss under the head Business & Profession’ as well as ‘Capital Gain’ has restriction for set-off with any other heads of income. However, there is no such restriction per se for set-off of ‘Loss under the head House Property’ with any other heads of income including ‘Salary income’. It is also noticed that sub-section (4) of Section 71 of the Act as referred to by AO with respect to set off of House Property loss is relevant for Assessment Year 1995-96 & 1996- 97. Hence for the relevant assessment year 2014-15 the said clause is not at all applicable. Thus we notice that the ld. Assessing Officer has not applied the provision of section 71 of the Act correctly on the facts of the instant case.

Further we notice that the ld. Assessing Officer has also not applied the provisions of sections 23& 24 of the Act correctly. Provisions of sections 23 & 24 read as under:- 6 Assessment Year: 2014-2015 Padmalochanan Radhakrishnan “23. (1)……………………….. (2) Where the property consists of a house or part of a house which— (a) is in the occupation of the owner for the purposes of his own residence: or cannot actually be occupied by the owner by reason of the (b) fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him, the annual value of such house or part of the house shall be taken to be nil. …………………………………………………………………….” On conjoint reading of Section 24 & Section 23 as reproduced herein above, your kindself will appreciate the fact that interest on loan paid in relation to self - occupied house property shall be allowed as deduction upto Rs. 2 lakhs. However, there is no such restriction per se with respect to interest paid in respect of let out property for the relevant assessment year 2014-15, It is most humbly submitted that the amendment that has been brought into the Act restricting the overall deduction on account of interest upto Rs. 2 lakhs in relation to self-occupied as well as let- out property has been brought into the Act with effect from AY 2020-21. However, for AY 2014-15 there was no restriction per se with regard to let- out properties.

From the perusal of sections 23 & 23 as above, we notice that only the interest paid on the property used for self-occupied purposes cannot be claimed in excess of Rs.1,50,000/- (Rs.2,00,000/- from A.Y. 2015-16 onwards). However, there is no such restriction for the interest paid on the let out property for the year under consideration. Further during the course of hearing, ld. Counsel for the assesese referred to the details of loss claimed under the head ‘house property’, which reads as under:- Assessment Year: 2014-2015 Padmalochanan Radhakrishnan

We, therefore, on going through the facts and circumstances of the case and also considering the provisions of section 71, Sections 23 & 24 of the Act are of the considered view that both the lower authorities failed to apply the provisions of section 71, section 23, and section 24 of the Act correctly on the facts of the instant case. We thus restore this issue to the file of ld. Assessing Officer for fresh adjudication considering the relevant provisions of sections 23, 24 and 71 of the Income Tax Act as well as considering the documentary evidence to be placed by the assessee in support of the alleged claim of interest paid on house property loan for which reasonable opportunity of hearing to be given to the assessee. Thus Grounds No. 1 to 3 are allowed for statistical purposes.

Other grounds of appeal