In a recent judgment by the Income Tax Appellate Tribunal in Ahmedabad, it was found that an assessee who had claimed deduction on housing loan interest of Rs. 1,50,000 under section 24(b) was wrongly disallowed the same by the Assessing Officer. The payment for the loan interest was made from the account of her husband, which the Assessing Officer had objected to. However, the learned CIT(A) observed that the deduction was allowable once the interest had been paid and that the technicality raised by the Assessing Officer was not important. The learned CIT(A) found that the incident of interest payment on borrowed capital used for the acquisition of an asset was of prime importance for the allowability of the claim, and the payment source had been fully explained by the appellant. The interest payment came through the account of the husband, which was not illegal and could be considered a gift. Therefore, the deduction to the appellant could not be denied, and the Assessing Officer was directed to delete the disallowance of Rs. 1,50,000 and issue a revised demand notice and challan.
The judgment notes that the provisions of section 24(b) of the Income Tax Act do not require that the payment of interest on a housing loan be made by the assessee. What is necessary is that the money should have been borrowed by the assessee for the purchase of the property on which the interest is payable. The interest-bearing fund used by the assessee for acquiring the house property is in compliance with the provisions of section 24(b) of the Act, and the source of payment for the interest is known, i.e. the husband of the assessee. Therefore, the assessee cannot be denied the benefit of deduction with respect to the interest expenses provided under the provisions of section 24(b) of the Act. As a result, the appeal of the assessee is allowed.
This judgment provides useful guidance for taxpayers who may have claimed deductions for housing loan interest paid from accounts other than their own. It clarifies that the payment source for the interest is not relevant, as long as the borrowed capital was used to purchase the property on which the interest is payable. This is an important reminder that technicalities raised by the Assessing Officer may not be relevant in all cases, and that the primary consideration should be whether the provisions of the Income Tax Act have been duly complied with.
(Related Assessment year : 2013-14) – [ITO, Ahmedabad. v. Mamta Rajivkumar Agarwal [TS-886-ITAT-2022(Ahd)] – Date of Judgement : 11.11.2022 (ITAT Ahmedabad)]