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Income Tax Appellate Tribunal, “SMC - A” BENCH : BANGALORE
Before: SHRI VIJAY PAL RAO
Per Vijay Pal Rao, Judicial Member This appeal by the assessee is directed against the order dated: 08.03.2016 of CIT(A) for the assessment year 2010-11. The assessee has raised the following grounds.
ITA No. 995/Bang/2016 Page 2 of 6 2. The assessee and his wife are owners of property and availed a loan jointly to acquire the said property. A sum of Rs. 5,66,259/- was paid
towards interest on the loan for acquiring the said property and the same was contributed by both the assessee as well as his wife. During the course of assessment proceedings the AO noted that the assessee and his
wife both claimed deduction of interest of Rs. 1,50,000/- on loan for this house property shown as self occupied property in their returns. The AO observed that the overall ceiling u/s. 24(b) in respect of self occupied
property was Rs. 1,50,000/-. Accordingly, the AO restricted the claim of interest deduction at Rs. 75,000/- in case of the assessee and added the remaining amount of Rs. 75,000/- to the income return. The assessee
challenged the action of the AO before the CIT(A) but could not succeed.
Before the Tribunal, the ld. AR of the assessee has referred to section 26 of the IT Act and submitted that in case the property is owned by two or
more persons and their shares are definite and ascertainable, the share of each person in the income from property is to be included in the total income and as per the explanation to section 26 whether a property is used
by co-owners for self residence, each such co-owner will be individually entitled to the concessional tax treatment under sub section 2 of section 23. Placing reliance on this provision the ld. AR has submitted that each
ITA No. 995/Bang/2016 Page 3 of 6 of the co-owner is entitled to the full benefit of interest deduction u/s. 24(b) of the Act. In support of his contention he has relied upon the
decision of the Hon’ble Supreme Court in case of CIT Vs Bijoy Kumar Almal (215 ITR 22) .
On the other hand, the ld. DR has submitted that the decision relied upon by the ld. AR is regarding the computation of annual value and deduction u/s. 23(2) and not regarding the deduction u/s. 24(b). He has relied upon the orders of the authorities below.
I have considered the rival submissions as well as relevant material on record. The property in question is owned by the assessee and his wife in
the joint name and they have paid the interest of Rs. 5,66,259/- in respect of the loan jointly availed to acquire the property. The question arises in this appeal of the assessee is the claim of the deduction u/s. 24(b) on account of interest on the loan for acquisition of the property is allowable
to the full amount of Rs. 1,50,000/- to each co-owner on the total deduction under this section shall not exceed Rs. 1,50,000/- irrespective of number of owners. The ld. AR of the assessee has referred to section 26
of the Act which reads as under.
ITA No. 995/Bang/2016 Page 4 of 6
Thus, as per the provisions u/s. 26 the share of each of the co-owner in the
income from house property has to be computed in accordance with the provisions of section 22 to 25 and further as per explanation to this section, if the house property is in occupation of the owners, then the benefit of section
23(2) is available to each of the co-owner individually. Therefore, the provisions of section 26 provides benefit of section 23(2) to each of the co- owner individually. Further the plain reading of section 24(b) as well as
second proviso makes it clear that the deduction on account of interest is allowable while computing the income as per the provisions of section 22 to 25 of the Act. It is pertinent to note that in case, the share of interest payment of each co-owner is more than Rs. 1,50,000/- each then the limitation
provided u/s. 24(b) can be applied for each individual co-owner of the property. This issue can be looked into from another angle where the co- owners instead of purchasing a property in joint name, purchases separate
properties in their individual name from the same loan capital then each of
ITA No. 995/Bang/2016 Page 5 of 6 the co-owner would be eligible for deduction u/s. 24(b) to the extent of Rs. 1,50,000/-. Therefore when the assessment of the share of each co-owner has to be computed separately in accordance with the provisions of section 22 to 25, then the each individual is entitled for full benefit of section 24(b) of the Act provided the actual interest liability of each co-owner is not less than Rs. 1,50,000/-. Accordingly, it is noted that the CIT(A) has not appreciated the decision of Hon’ble Bombay High Court in case of CIT Vs Abdullabhai M. Moonim (132 ITR 642) in its correct perspective wherein the issue of allowing the deduction u/s. 24 on account of interest on the loan taken by the joint owners and further by individual owner claimed the interest on the loan apart from the loan jointly taken. The Hon’ble High Court has allowed the claim of the individual co-owner on account of interest on loan which was taken apart from the collective loan taken by the joint owners from the bank. Hence the orders of the authorities below qua this issue are set aside and claim of the assessee is allowed. 7. In the result, the appeal of the assessee is allowed.
Pronounced in the open court on this 24th day of March, 2017
Sd/- (VIJAY PAL RAO) Judicial Member Bangalore, Dated, the 24th March, 2017. / MS/
ITA No. 995/Bang/2016 Page 6 of 6 Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file By order
Assistant Registrar, ITAT, Bangalore.