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?
No. The second proviso to s.24(b) caps the deduction only for a property referred to in s.23(2), and s.23(2) speaks of a house or part of a house in the owner's occupation for his own residence, which can only be a residential property. The Tribunal held the cap inapplicable to a commercial unit, allowed the whole interest of Rs 1,31,39,560, and directed that the resulting house property loss be carried forward under s.71B.
Decided by the ITAT (Sandeep Singh Karhail, Judicial Member and Gagan Goyal, Accountant Member) on 2023-01-05, reported as ITA No.1826/Mum./2022 (ITAT Mumbai); date of hearing 13 October 2022, order pronounced 5 January 2023. It bears on section 24, section 24(b), section 23(2), section 71B, section 143(1) of the Income Tax Act 1961, in House Property, Deductions & Disallowances and Assessment & Scrutiny matters.
This is a processing-stage problem more than an assessment problem. The intimation under s.143(1) applied the Rs 2,00,000 ceiling mechanically because the assessee had only one property and had shown no self-occupied house, and the CIT(A) upheld it on the reasoning that where a person owns one property he must be living in it. The Tribunal cut through that by going to the words of s.23(2), which nil-rate only a house in the owner's occupation for his own residence or one he cannot occupy because his employment or profession keeps him elsewhere. A commercial unit cannot answer that description whatever the owner does with it, so the ceiling in the second proviso never engages and the interest is deductible without limit. The evidence that carried the day was contractual, a clause in the purchase agreement restricting use of the unit to an IT office under the State IT Park Policy, backed by the department's own acceptance of the same claim in the two neighbouring years. Two cautions on reach: the year was AY 2016-17, so the Rs 2,00,000 inter-head cap in s.71(3A) was not in play and would restrict the set-off from AY 2018-19; and a commercial property not actually let is still not free, since its annual value has to be offered under s.23(1)(a).
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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For AY 2016-17 the assessee, an individual, filed a return on 30 July 2016 declaring a total loss of Rs 1,09,61,771 and a revised return on 23 February 2017 declaring a total loss of Rs 1,08,81,242 after set off and carry forward of house property loss. He had borrowed to purchase Unit 3C, Cynergy, Prabhadevi, Mumbai 400028 under an agreement dated 30 December 2013, clause (mm) of which provided that the unit could be used only for setting up an IT office in accordance with the IT Park Policy of the Government of Maharashtra. Interest of Rs 1,31,39,560 was paid on the loan during the year. The revised return was processed under s.143(1) by intimation dated 28 May 2017, which computed total income at Rs 20,58,230 by restricting the current year loss set off to Rs 2,00,000 and denying carry forward of the balance house property loss of Rs 1,08,81,242. A rectification application dated 28 November 2017 under s.154, pointing out that the assessee had no self-occupied property for the year, was dismissed by the CPC on 17 April 2019. The CIT(A) dismissed the appeal, reasoning that where an assessee owns more than one house he may live in one and the rest are deemed let out, and that a claim of no self-occupied property would still require one property to be treated as self-occupied, so the Rs 2,00,000 restriction was on right lines and no question of carrying forward the balance loss arose. Before the Tribunal it was pointed out that the deduction had been allowed in full in AYs 2015-16 and 2017-18.
Appeal allowed. The restriction in the second proviso to s.24(b) does not apply to a commercial property, and the whole of the interest of Rs 1,31,39,560 paid on the loan taken to acquire the unit was allowed as a deduction under s.24(b). Consequently the house property loss not set off against income under other heads was directed to be allowed to be carried forward under s.71B. Grounds A, B and E were allowed; grounds C and D were not pressed.
The Tribunal read s.24(b) with its provisos and found that the second proviso restricts the deduction to Rs 2,00,000 only in respect of the property referred to in the first proviso, which in turn is the property referred to in s.23(2). Setting out s.23(2), which deals with a house or part of a house in the occupation of the owner for the purposes of his own residence, or which he cannot occupy because his employment, business or profession requires him to reside elsewhere in a building not belonging to him, the Tribunal held that the property contemplated there can only be residential and cannot be commercial. On the facts, clause (mm) of the agreement dated 30 December 2013, at pages 106 to 143 of the paper book, confined the use of the unit to an IT office under the State IT Park Policy, so the property was commercial and the second proviso did not bite. The Tribunal also noted that in the assessment orders for AYs 2015-16 and 2017-18 the Assessing Officer had, while computing the annual letting value of the same property, granted deduction of the interest paid on the loan under s.24(b). The entire interest being allowable, the unabsorbed loss followed under s.71B.
Thus, from the reading of section 23(2) of the Act, it is evident that the property as referred to therein is only the residential property and the same cannot be the commercial property.
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Handle my notice → Ask a CA on WhatsAppNo. The second proviso to s.24(b) caps the deduction only for a property referred to in s.23(2), and s.23(2) speaks of a house or part of a house in the owner's occupation for his own residence, which can only be a residential property. The Tribunal held the cap inapplicable to a commercial unit, allowed the whole interest of Rs 1,31,39,560, and directed that the resulting house property loss be carried forward under s.71B. This was decided by the ITAT (Sandeep Singh Karhail, Judicial Member and Gagan Goyal, Accountant Member) and bears on section 24, section 24(b), section 23(2), section 71B, section 143(1) of the Income Tax Act 1961. It is reported as ITA No.1826/Mum./2022 (ITAT Mumbai); date of hearing 13 October 2022, order pronounced 5 January 2023. This is a processing-stage problem more than an assessment problem. The intimation under s.143(1) applied the Rs 2,00,000 ceiling mechanically because the assessee had only one property and had shown no self-occupied house, and the CIT(A) upheld it on the reasoning that where a person owns one property he must be living in it. The Tribunal cut through that by going to the words of s.23(2), which nil-rate only a house in the owner's occupation for his own residence or one he cannot occupy because his employment or profession keeps him elsewhere. A commercial unit cannot answer that description whatever the owner does with it, so the ceiling in the second proviso never engages and the interest is deductible without limit. The evidence that carried the day was contractual, a clause in the purchase agreement restricting use of the unit to an IT office under the State IT Park Policy, backed by the department's own acceptance of the same claim in the two neighbouring years. Two cautions on reach: the year was AY 2016-17, so the Rs 2,00,000 inter-head cap in s.71(3A) was not in play and would restrict the set-off from AY 2018-19; and a commercial property not actually let is still not free, since its annual value has to be offered under s.23(1)(a). If it applies to you, the first step is this: Where the property is commercial, say so in the return and do not leave the self-occupied field to be inferred; the adjustment here was made at CPC because no self-occupied property had been shown.
For AY 2016-17 the assessee, an individual, filed a return on 30 July 2016 declaring a total loss of Rs 1,09,61,771 and a revised return on 23 February 2017 declaring a total loss of Rs 1,08,81,242 after set off and carry forward of house property loss. He had borrowed to purchase Unit 3C, Cynergy, Prabhadevi, Mumbai 400028 under an agreement dated 30 December 2013, clause (mm) of which provided that the unit could be used only for setting up an IT office in accordance with the IT Park Policy of the Government of Maharashtra. Interest of Rs 1,31,39,560 was paid on the loan during the year. The revised return was processed under s.143(1) by intimation dated 28 May 2017, which computed total income at Rs 20,58,230 by restricting the current year loss set off to Rs 2,00,000 and denying carry forward of the balance house property loss of Rs 1,08,81,242. A rectification application dated 28 November 2017 under s.154, pointing out that the assessee had no self-occupied property for the year, was dismissed by the CPC on 17 April 2019. The CIT(A) dismissed the appeal, reasoning that where an assessee owns more than one house he may live in one and the rest are deemed let out, and that a claim of no self-occupied property would still require one property to be treated as self-occupied, so the Rs 2,00,000 restriction was on right lines and no question of carrying forward the balance loss arose. Before the Tribunal it was pointed out that the deduction had been allowed in full in AYs 2015-16 and 2017-18. The matter was decided on 2023-01-05 by the ITAT (Sandeep Singh Karhail, Judicial Member and Gagan Goyal, Accountant Member). On those facts the ITAT held as follows. Appeal allowed. The restriction in the second proviso to s.24(b) does not apply to a commercial property, and the whole of the interest of Rs 1,31,39,560 paid on the loan taken to acquire the unit was allowed as a deduction under s.24(b). Consequently the house property loss not set off against income under other heads was directed to be allowed to be carried forward under s.71B. Grounds A, B and E were allowed; grounds C and D were not pressed.
The Tribunal read s.24(b) with its provisos and found that the second proviso restricts the deduction to Rs 2,00,000 only in respect of the property referred to in the first proviso, which in turn is the property referred to in s.23(2). Setting out s.23(2), which deals with a house or part of a house in the occupation of the owner for the purposes of his own residence, or which he cannot occupy because his employment, business or profession requires him to reside elsewhere in a building not belonging to him, the Tribunal held that the property contemplated there can only be residential and cannot be commercial. On the facts, clause (mm) of the agreement dated 30 December 2013, at pages 106 to 143 of the paper book, confined the use of the unit to an IT office under the State IT Park Policy, so the property was commercial and the second proviso did not bite. The Tribunal also noted that in the assessment orders for AYs 2015-16 and 2017-18 the Assessing Officer had, while computing the annual letting value of the same property, granted deduction of the interest paid on the loan under s.24(b). The entire interest being allowable, the unabsorbed loss followed under s.71B. In the words reproduced by the source cited on this page: "Thus, from the reading of section 23(2) of the Act, it is evident that the property as referred to therein is only the residential property and the same cannot be the commercial property."
It was decided by the ITAT on 2023-01-05 and is reported as ITA No.1826/Mum./2022 (ITAT Mumbai); date of hearing 13 October 2022, order pronounced 5 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), section 71B, section 143(1), 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. The restriction in the second proviso to s.24(b) does not apply to a commercial property, and the whole of the interest of Rs 1,31,39,560 paid on the loan taken to acquire the unit was allowed as a deduction under s.24(b). Consequently the house property loss not set off against income under other heads was directed to be allowed to be carried forward under s.71B. Grounds A, B and E were allowed; grounds C and D were not pressed. It arises in House Property, Deductions & Disallowances and Assessment & Scrutiny matters, on section 24, section 24(b), section 23(2), section 71B, section 143(1) of the Income Tax Act 1961, and was decided by Sandeep Singh Karhail, Judicial Member and Gagan Goyal, 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. Put the use restriction on record: the clause of the purchase or allotment agreement limiting the unit to commercial or office use, the approved plan, the property tax assessment showing commercial rating, and any policy under which the building was sanctioned. Produce the assessment or intimation for adjacent years in which the same claim was accepted; the Tribunal expressly relied on the AY 2015-16 and AY 2017-18 orders. Take the point that s.24(b)'s second proviso is keyed to a property referred to in s.23(2), and set out s.23(2) itself; the argument is textual and does not depend on facts once the property is shown to be commercial. Claim the carry forward of the unabsorbed house property loss under s.71B in the return itself, and for AY 2018-19 onwards compute the inter-head set-off subject to the Rs 2,00,000 cap in s.71(3A) before working out what is carried forward. If the adjustment was made under s.143(1)(a), check whether the prescribed intimation and response procedure in the first and second provisos to that clause was followed, which is an independent ground.
Searched for later treatment; none was found. That is not the same as a source affirming it. The citator returns nothing. A name search on 'Koticha' returns 300 documents, none of which is a later decision citing this order; the Bombay High Court hits are unrelated company and recovery litigation involving other Kotichas. No section 260A appeal was traced. The holding that the two-lakh cap in the second proviso to section 24(b) is confined to self-occupied residential property and does not touch interest on a let-out or commercial property is at present 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 retrieved header describes the Bench as the 'SMC' Bench while naming two Members, a Judicial Member and an Accountant Member, which is inconsistent on its face; both names appear again in the signature block. The CIT(A)'s order as extracted refers to 'deductions of interest u/s 24(5)', which is a slip for s.24(b). The retrieved text carries an unnumbered paragraph between paragraphs 7 and 9 recording the Departmental Representative's submission, so the numbering in the report skips 8. Grounds C and D were not pressed and are not decided. 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. The restriction in the second proviso to s.24(b) does not apply to a commercial property, and the whole of the interest of Rs 1,31,39,560 paid on the loan taken to acquire the unit was allowed as a deduction under s.24(b). Consequently the house property loss not set off against income under other heads was directed to be allowed to be carried forward under s.71B. Grounds A, B and E were allowed; grounds C and D were not pressed.
TaxSphere, “Sameer Kishore Koticha v DCIT”, https://taxnotice.vittsphere.com/caselaw/case/sameer-koticha-24b-two-lakh-cap-not-for-commercial-property/ (validity last checked 2026-09-07)
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My client took his housing loan in 2014 and the interest has always been fully set off against salary. From AY 2018-19 the officer restricts the set-off to Rs 2,00,000. Can I argue the cap cannot apply to a loan taken before the amendment?
My client set off the whole house property loss against salary for AY 2018-19, not knowing about the new Rs 2,00,000 cap. The officer restricted it and has levied a s.270A penalty for under-reporting. Can the penalty be resisted?
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?
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?
