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?
No. The pre-construction period ends on the 31st March immediately preceding the date of acquisition or completion, so for a December 2015 possession it ended on 31 March 2015. Interest paid from 1 April 2015 onwards is current-year interest of that previous year and is deductible in full, not in five instalments.
Decided by the ITAT (S.S. Godara, Judicial Member and Dr. Dipak P. Ripote, Accountant Member) on 2023-01-16, reported as IT(SS)A No.108/PUN/2019 (ITAT Pune, 'A' Bench); date of hearing 20 October 2022, date of pronouncement 16 January 2023. It bears on section 24, section 24(b), section 23(2) of the Income Tax Act 1961, in House Property and Deductions & Disallowances matters.
This is the most common arithmetic error in a s.24(b) claim and it is usually made by the department, not the taxpayer. The Explanation to s.24(b) allows the interest 'for the period prior to the previous year in which the property has been acquired or constructed' in five equal instalments beginning with that year; officers routinely read the words as covering everything paid before the date of possession, which drags eight or nine months of the year of possession itself into the five-year spread and defers four-fifths of it. The Tribunal here fixed the cut-off at 31 March immediately preceding acquisition, which is what the words of the Explanation actually produce. Note the limit of the win: on the same appeal the assessee lost the ground on his other property, where he occupied part of a house and let part of it and could not tell the officer how much of the floor area was used for his profession, so the interest there stayed capped at Rs 2,00,000.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee, a cost accountant, was assessed for AY 2016-17 under s.143(3) read with s.153A following a search. He owned two properties. The first, on Jangli Maharaj Road, Pune, was partly occupied by him and partly let; he received office rent of Rs 37,500 a month and consultation fees of Rs 24,00,000. Against that property he claimed housing loan interest of Rs 2,43,280, of which the CIT(A) allowed only Rs 2,00,000, treating the self-occupied portion as a s.23(2) property, and disallowed Rs 43,480. The second property was Flat No.602, Sudatta Sankul, Sinhagad Road, Pune, possession of which the assessee received in December 2015, that is, during the previous year relevant to AY 2016-17. The CIT(A) treated the interest paid from April 2015 up to 8 December 2015 as pre-construction period interest and allowed only one-fifth of it, spreading the rest over the following four years. The assessee appealed on both grounds.
Appeal partly allowed. On Ground No.1 the Tribunal upheld the restriction of interest to Rs 2,00,000, because the assessee had not specified what part of the Jangli Maharaj Road house was used for office purposes as against residence. On Ground No.2 the Tribunal held that the pre-construction period ends on the 31st March immediately preceding the date of completion or acquisition; possession having been received in December 2015, that date was 31 March 2015, and the whole of the interest claimed on the Sudatta Sankul flat for the year was allowable, not one-fifth of it.
The Tribunal took the pre-construction period as running from the date the loan is borrowed and ending on the earlier of the date the loan is repaid or the 31st March immediately preceding the date of completion of construction or acquisition of the property. Applying that definition to the facts, acquisition having taken place in December 2015, the 31st March immediately preceding it was 31 March 2015; interest referable to the period from 1 April 2015 therefore fell into the previous year of acquisition itself and was an ordinary current-year deduction rather than accumulated prior-period interest to be spread. On Ground No.1 the Tribunal declined to disturb the CIT(A) because the assessee had put no material on record identifying the extent of the house used professionally, so the CIT(A)'s treatment of the occupied part as a s.23(2) property attracting the Rs 2,00,000 ceiling could not be faulted.
In this case, the possession of the property was received in December, 2015. Therefore, 31st March immediately prior to the date of acquisition, in this case, acquisition was in December, 2015, will be 31st March, 2015.
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Handle my notice → Ask a CA on WhatsAppNo. The pre-construction period ends on the 31st March immediately preceding the date of acquisition or completion, so for a December 2015 possession it ended on 31 March 2015. Interest paid from 1 April 2015 onwards is current-year interest of that previous year and is deductible in full, not in five instalments. This was decided by the ITAT (S.S. Godara, Judicial Member and Dr. Dipak P. Ripote, Accountant Member) and bears on section 24, section 24(b), section 23(2) of the Income Tax Act 1961. It is reported as IT(SS)A No.108/PUN/2019 (ITAT Pune, 'A' Bench); date of hearing 20 October 2022, date of pronouncement 16 January 2023. This is the most common arithmetic error in a s.24(b) claim and it is usually made by the department, not the taxpayer. The Explanation to s.24(b) allows the interest 'for the period prior to the previous year in which the property has been acquired or constructed' in five equal instalments beginning with that year; officers routinely read the words as covering everything paid before the date of possession, which drags eight or nine months of the year of possession itself into the five-year spread and defers four-fifths of it. The Tribunal here fixed the cut-off at 31 March immediately preceding acquisition, which is what the words of the Explanation actually produce. Note the limit of the win: on the same appeal the assessee lost the ground on his other property, where he occupied part of a house and let part of it and could not tell the officer how much of the floor area was used for his profession, so the interest there stayed capped at Rs 2,00,000. If it applies to you, the first step is this: Fix the date of acquisition or completion first, from the possession letter, completion certificate or registered conveyance, and then work backwards to the 31st March immediately preceding it. That date, not the date of possession, is the end of the pre-construction period.
The assessee, a cost accountant, was assessed for AY 2016-17 under s.143(3) read with s.153A following a search. He owned two properties. The first, on Jangli Maharaj Road, Pune, was partly occupied by him and partly let; he received office rent of Rs 37,500 a month and consultation fees of Rs 24,00,000. Against that property he claimed housing loan interest of Rs 2,43,280, of which the CIT(A) allowed only Rs 2,00,000, treating the self-occupied portion as a s.23(2) property, and disallowed Rs 43,480. The second property was Flat No.602, Sudatta Sankul, Sinhagad Road, Pune, possession of which the assessee received in December 2015, that is, during the previous year relevant to AY 2016-17. The CIT(A) treated the interest paid from April 2015 up to 8 December 2015 as pre-construction period interest and allowed only one-fifth of it, spreading the rest over the following four years. The assessee appealed on both grounds. The matter was decided on 2023-01-16 by the ITAT (S.S. Godara, Judicial Member and Dr. Dipak P. Ripote, Accountant Member). On those facts the ITAT held as follows. Appeal partly allowed. On Ground No.1 the Tribunal upheld the restriction of interest to Rs 2,00,000, because the assessee had not specified what part of the Jangli Maharaj Road house was used for office purposes as against residence. On Ground No.2 the Tribunal held that the pre-construction period ends on the 31st March immediately preceding the date of completion or acquisition; possession having been received in December 2015, that date was 31 March 2015, and the whole of the interest claimed on the Sudatta Sankul flat for the year was allowable, not one-fifth of it.
The Tribunal took the pre-construction period as running from the date the loan is borrowed and ending on the earlier of the date the loan is repaid or the 31st March immediately preceding the date of completion of construction or acquisition of the property. Applying that definition to the facts, acquisition having taken place in December 2015, the 31st March immediately preceding it was 31 March 2015; interest referable to the period from 1 April 2015 therefore fell into the previous year of acquisition itself and was an ordinary current-year deduction rather than accumulated prior-period interest to be spread. On Ground No.1 the Tribunal declined to disturb the CIT(A) because the assessee had put no material on record identifying the extent of the house used professionally, so the CIT(A)'s treatment of the occupied part as a s.23(2) property attracting the Rs 2,00,000 ceiling could not be faulted. In the words reproduced by the source cited on this page: "In this case, the possession of the property was received in December, 2015. Therefore, 31st March immediately prior to the date of acquisition, in this case, acquisition was in December, 2015, will be 31st March, 2015."
It was decided by the ITAT on 2023-01-16 and is reported as IT(SS)A No.108/PUN/2019 (ITAT Pune, 'A' Bench); date of hearing 20 October 2022, date of pronouncement 16 January 2023. 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 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 partly allowed. On Ground No.1 the Tribunal upheld the restriction of interest to Rs 2,00,000, because the assessee had not specified what part of the Jangli Maharaj Road house was used for office purposes as against residence. On Ground No.2 the Tribunal held that the pre-construction period ends on the 31st March immediately preceding the date of completion or acquisition; possession having been received in December 2015, that date was 31 March 2015, and the whole of the interest claimed on the Sudatta Sankul flat for the year was allowable, not one-fifth of it. It arises in House Property and Deductions & Disallowances matters, on section 24, section 24(b), section 23(2) of the Income Tax Act 1961, and was decided by S.S. Godara, Judicial Member and Dr. Dipak P. Ripote, Accountant 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. Split the interest certificate into two buckets on that date: everything up to the preceding 31 March goes into the one-fifth spread, everything from 1 April of the year of acquisition is a straight deduction of that year. If the officer has already spread the year-of-possession interest, put the split on record in a written submission with the possession letter annexed, because the point is arithmetical and is usually conceded once the two dates are separated. Where a house is part self-occupied and part let or part used for a profession, measure and document the area split before the assessment, not at appeal; this assessee lost that ground purely for want of area figures. Remember that the deduction spread over five years is the accumulated pre-construction interest only, and the second proviso Rs 2,00,000 ceiling for a s.23(2) house applies to the aggregate of current-year plus instalment interest, not to each separately.
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 six documents: this order, the Tribunal's earlier order of 29 August 2022 in the same assessee's case, and four unrelated Bombay High Court and Delhi High Court civil matters involving other Annachhatres. No later Bench has cited the order and no Bombay High Court appeal was traced. The cut-off adopted for the pre-construction period under the Explanation to section 24(b) therefore rests on 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.
Two rupee figures for the same claim appear in the order: the finding on Ground No.2 allows 'Rs.4,28,363/-' while the recital of the assessee's claim earlier in the order prints 'Rs.4,24,363/-'. Both figures were confirmed on separate fetches of the same document, so the conflict is in the report itself. The retrieved text of the body did not carry visible paragraph numbers for the findings, so the key quote is identified by the ground it decides rather than by a paragraph number. The Tribunal reaches the cut-off through a CBDT explanation of what the pre-construction period means rather than by construing the Explanation to s.24(b) directly in the retrieved text; the result is the same as the statutory words produce, but a reader relying on this should cite the Explanation itself as well. 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 partly allowed. On Ground No.1 the Tribunal upheld the restriction of interest to Rs 2,00,000, because the assessee had not specified what part of the Jangli Maharaj Road house was used for office purposes as against residence. On Ground No.2 the Tribunal held that the pre-construction period ends on the 31st March immediately preceding the date of completion or acquisition; possession having been received in December 2015, that date was 31 March 2015, and the whole of the interest claimed on the Sudatta Sankul flat for the year was allowable, not one-fifth of it.
TaxSphere, “Mangesh Ramesh Annachhatre v DCIT”, https://taxnotice.vittsphere.com/caselaw/case/mangesh-annachhatre-24b-pre-construction-period-cut-off/ (validity last checked 2026-09-07)
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