I booked a flat years ago and have been paying the home loan, but the builder and the society are in litigation and I still have no possession. The officer has disallowed my s.24(b) interest because I do not occupy the flat. Can he do that?
No. Section 24(b) prescribes no condition that the assessee must have taken possession of the property. The Tribunal set aside the disallowance and directed the officer to allow the Rs 2,00,000 deduction, holding that entitlement under ss.22 to 24 turns on ownership and not on possession.
Decided by the ITAT (M. Balaganesh, Accountant Member and Ravish Sood, Judicial Member) on 2021-09-01, reported as ITA No.4831/MUM/2019 (ITAT Mumbai, 'A' Bench); date of hearing 23 August 2021, date of pronouncement 1 September 2021. It bears on section 24, section 24(b), section 22, section 23, section 23(2) of the Income Tax Act 1961, in House Property and Deductions & Disallowances matters.
This is the standard answer to the standard notice in a delayed-possession case, and it is squarely reasoned rather than decided on facts. The CIT(A)'s logic below is the logic every such notice uses: if the buyer has no control over the flat he can earn no income from it, so allowing an interest deduction year after year cannot have been intended. The Tribunal called that reasoning misconceived and divorced of any force of law, because the annual value under ss.22 and 23 is fixed by reference to ownership. What the decision does NOT do is address the second proviso timing condition, and that is the real exposure in a badly delayed project: the Rs 2,00,000 ceiling applies only where acquisition or construction is completed within five years from the end of the financial year in which the capital was borrowed, and when a builder slips past that, the ceiling drops to Rs 30,000 under the first proviso. The assessee here purchased under a registered agreement dated 20 September 2009 and was allowed Rs 2,00,000 for AY 2015-16 out of interest of Rs 2,69,842, but no party appears to have raised the five-year point, so the order is authority on possession only.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee, a lawyer, filed his return for AY 2015-16 on 31 March 2017 declaring total income of Rs 1,19,68,190. The case was taken up for scrutiny. By a registered agreement dated 20 September 2009 he had purchased Flat No. A-2101, Palm Beach Residency 'A' Wing, 21st Floor, Sector 4, Palm Beach Road, Nerul, Navi Mumbai for a consideration of Rs 1,60,89,250, financed by a loan on which he paid interest of Rs 2,69,842.12 during the year. He filed the lender's certificate evidencing that payment in the assessment proceedings and claimed the ceiling deduction of Rs 2,00,000 under s.24(b). The Assessing Officer disallowed the claim on the sole ground that the assessee had not taken possession of the flat. The CIT(A) upheld the disallowance, observing that the property was neither in the appellant's possession nor under his control, that there was protracted litigation with the society and the builder, and that on the appellant's approach a deduction would run for years without any income ever arising, which could not be the legislative intent.
Appeal allowed. There is no precondition or eligibility criterion in s.24(b) requiring an assessee to have taken possession of the property acquired. The CIT(A)'s order was set aside and the Assessing Officer was directed to allow the deduction of Rs 2,00,000 under s.24(b).
Setting out s.24(b) as it stood for the year, the Tribunal read the clause as entitling an assessee to deduct any interest payable on capital borrowed for acquiring, constructing, repairing, renewing or reconstructing a property, with the first and second provisos doing no more than fixing an upper limit on the amount of the deduction for a property referred to in s.23(2); the provisos do not touch entitlement. The assessee had admittedly acquired the property by a registered agreement in 2009. The CIT(A)'s premise that absence of control means no income and therefore no deduction was rejected as misconceived and divorced of any force of law, because the annual lettable value under s.22 read with s.23 depends on ownership of the property irrespective of whether the assessee has taken possession, so the CIT(A)'s logic ran against the mandate of ss.22 to 24. The interest having been paid and evidenced by a certificate filed in the assessment proceedings, the disallowance could not stand.
In our considered view, for claiming deduction of interest under Sec. 24(b) of the Act there is neither any such precondition nor an eligibility criteria prescribed that the assessee should have taken possession of the property so purchased or acquired by him.
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Handle my notice → Ask a CA on WhatsAppNo. Section 24(b) prescribes no condition that the assessee must have taken possession of the property. The Tribunal set aside the disallowance and directed the officer to allow the Rs 2,00,000 deduction, holding that entitlement under ss.22 to 24 turns on ownership and not on possession. This was decided by the ITAT (M. Balaganesh, Accountant Member and Ravish Sood, Judicial Member) and bears on section 24, section 24(b), section 22, section 23, section 23(2) of the Income Tax Act 1961. It is reported as ITA No.4831/MUM/2019 (ITAT Mumbai, 'A' Bench); date of hearing 23 August 2021, date of pronouncement 1 September 2021. This is the standard answer to the standard notice in a delayed-possession case, and it is squarely reasoned rather than decided on facts. The CIT(A)'s logic below is the logic every such notice uses: if the buyer has no control over the flat he can earn no income from it, so allowing an interest deduction year after year cannot have been intended. The Tribunal called that reasoning misconceived and divorced of any force of law, because the annual value under ss.22 and 23 is fixed by reference to ownership. What the decision does NOT do is address the second proviso timing condition, and that is the real exposure in a badly delayed project: the Rs 2,00,000 ceiling applies only where acquisition or construction is completed within five years from the end of the financial year in which the capital was borrowed, and when a builder slips past that, the ceiling drops to Rs 30,000 under the first proviso. The assessee here purchased under a registered agreement dated 20 September 2009 and was allowed Rs 2,00,000 for AY 2015-16 out of interest of Rs 2,69,842, but no party appears to have raised the five-year point, so the order is authority on possession only. If it applies to you, the first step is this: Answer the notice on ownership, not on occupation: produce the registered agreement or allotment-cum-sale document and the lender's interest certificate, and point out that s.24(b) contains no possession condition.
The assessee, a lawyer, filed his return for AY 2015-16 on 31 March 2017 declaring total income of Rs 1,19,68,190. The case was taken up for scrutiny. By a registered agreement dated 20 September 2009 he had purchased Flat No. A-2101, Palm Beach Residency 'A' Wing, 21st Floor, Sector 4, Palm Beach Road, Nerul, Navi Mumbai for a consideration of Rs 1,60,89,250, financed by a loan on which he paid interest of Rs 2,69,842.12 during the year. He filed the lender's certificate evidencing that payment in the assessment proceedings and claimed the ceiling deduction of Rs 2,00,000 under s.24(b). The Assessing Officer disallowed the claim on the sole ground that the assessee had not taken possession of the flat. The CIT(A) upheld the disallowance, observing that the property was neither in the appellant's possession nor under his control, that there was protracted litigation with the society and the builder, and that on the appellant's approach a deduction would run for years without any income ever arising, which could not be the legislative intent. The matter was decided on 2021-09-01 by the ITAT (M. Balaganesh, Accountant Member and Ravish Sood, Judicial Member). On those facts the ITAT held as follows. Appeal allowed. There is no precondition or eligibility criterion in s.24(b) requiring an assessee to have taken possession of the property acquired. The CIT(A)'s order was set aside and the Assessing Officer was directed to allow the deduction of Rs 2,00,000 under s.24(b).
Setting out s.24(b) as it stood for the year, the Tribunal read the clause as entitling an assessee to deduct any interest payable on capital borrowed for acquiring, constructing, repairing, renewing or reconstructing a property, with the first and second provisos doing no more than fixing an upper limit on the amount of the deduction for a property referred to in s.23(2); the provisos do not touch entitlement. The assessee had admittedly acquired the property by a registered agreement in 2009. The CIT(A)'s premise that absence of control means no income and therefore no deduction was rejected as misconceived and divorced of any force of law, because the annual lettable value under s.22 read with s.23 depends on ownership of the property irrespective of whether the assessee has taken possession, so the CIT(A)'s logic ran against the mandate of ss.22 to 24. The interest having been paid and evidenced by a certificate filed in the assessment proceedings, the disallowance could not stand. In the words reproduced by the source cited on this page: "In our considered view, for claiming deduction of interest under Sec. 24(b) of the Act there is neither any such precondition nor an eligibility criteria prescribed that the assessee should have taken possession of the property so purchased or acquired by him."
It was decided by the ITAT on 2021-09-01 and is reported as ITA No.4831/MUM/2019 (ITAT Mumbai, 'A' Bench); date of hearing 23 August 2021, date of pronouncement 1 September 2021. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 24, section 24(b), section 22, section 23, section 23(2), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. Appeal allowed. There is no precondition or eligibility criterion in s.24(b) requiring an assessee to have taken possession of the property acquired. The CIT(A)'s order was set aside and the Assessing Officer was directed to allow the deduction of Rs 2,00,000 under s.24(b). It arises in House Property and Deductions & Disallowances matters, on section 24, section 24(b), section 22, section 23, section 23(2) of the Income Tax Act 1961, and was decided by M. Balaganesh, Accountant Member and Ravish Sood, Judicial Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not concede the point merely because the flat is undelivered, and do not let the claim be recharacterised as capital work-in-progress. Separately, and before you file, run the second proviso timing test yourself: count five years from the end of the financial year in which the capital was borrowed and check whether acquisition or construction was completed within it. If it was not, the ceiling for a s.23(2) house is Rs 30,000, not Rs 2,00,000, and claiming the higher figure invites an adjustment. Where the project has genuinely slipped, keep the builder's correspondence, RERA filings and any completion or occupation certificate on file, because the date of completion is the fact the proviso turns on. Keep the lender's certificate under the third proviso to s.24(b), which is a precondition to the second proviso deduction and is separately demanded in scrutiny.
Searched for later treatment; none was found. That is not the same as a source affirming it. The citator returns nothing. A name search returns 243 documents and none is a later tax decision citing this order; the Bombay High Court hits are the Jaiji Mansion Co-operative Housing Society litigation and the Supreme Court hits are daily orders in which the name appears as counsel. No appeal was traced. The holding that section 24(b) interest is allowable for a year in which possession had not been handed over is supported by this order alone. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order reproduces s.24(b) as it stood for the year, and the retrieved text of that extract carries an OCR corruption: 'as reduced by any pan thereof allowed as deduction' where the statute reads 'part'. The reproduced provisos are also printed out of sequence, with the Explanation on pre-construction interest appearing between the second and third provisos. In the retrieved text two fragments of the Tribunal's own sentence appear inside quotation marks, which the underlying document does not carry; the key quote below was re-fetched on its own and returned without any added marks. The Tribunal records having heard only the Departmental Representative. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Appeal allowed. There is no precondition or eligibility criterion in s.24(b) requiring an assessee to have taken possession of the property acquired. The CIT(A)'s order was set aside and the Assessing Officer was directed to allow the deduction of Rs 2,00,000 under s.24(b).
TaxSphere, “Abeezar Faizullabhoy v CIT(A)-28”, https://taxnotice.vittsphere.com/caselaw/case/abeezar-faizullabhoy-24b-interest-without-possession/ (validity last checked 2026-09-07)
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I owned two houses at the start of the year and sold one in July. I treated the second house as deemed let out for those first months and claimed the full section 24(b) interest for that period. The Assessing Officer says there is no such thing as a split-year claim and has capped me at Rs 2,00,000. Who is right?
I got possession of my flat in December 2015. The officer says all the interest I paid from April 2015 to December 2015 is pre-construction interest and only one-fifth is allowable this year. Is he right?
The CPC has restricted my s.24(b) interest to Rs 2,00,000 by treating my only property as self-occupied. It is a commercial unit that I cannot live in. Can the cap apply?
My client owns a one-third share in the house he lives in with his brothers. The officer has computed the relief on the whole property and then split the balance three ways. Is that right?
