Section 23(2)

Section 23(2) — the law in short

What the courts have decided on section 23(2), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Bijoy Kumar Almal Supreme CourtHelps taxpayer
  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?
  No. Where a house is owned by two or more persons whose respective shares are definite and ascertainable, section 26 requires the share of each person in the income computed under sections 22 to 25 to be included in his own total income, and the relief under section 23(2) is available to each co-owner separately out of his own share — not once over the whole property. The Supreme Court held the language of section 26 is clear enough even without the Explanation added to it in 1976, which puts the same result beyond doubt.
• Bhagwan Dass Jain v Union of India Supreme CourtHelps department
  I live in my own house and earn nothing from it. Can Parliament tax me on a notional annual value as income from house property?
  Yes. The Supreme Court refused leave and dismissed the petition, holding that including an amount computed under section 23(2) for a self-occupied house is within Parliament's power to tax income under Entry 82 of List I. Income in Entry 82 is not confined to money actually received. Even in its ordinary economic sense it includes not merely what comes in by exploiting property but what one saves by using it oneself, and what can be converted into income may reasonably be regarded as giving rise to income. The tax is on income from house property, computed in an artificial way, and not on the building.
• Deepak Kantilal Shah v DCIT ITATHelps taxpayerValidity unconfirmed
  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?
  The Tribunal held that the assessee was right. Section 23(4)(a) is a complete and self-exhaustive code for the case where more than one house is held, the legislature has not restricted it by any proviso or explanation, and it does not restrict a splitting-up of the accounting period; applying a strict construction the Tribunal held that both the lower authorities had erred and deleted the disallowance of Rs 13,81,247.
• Mangesh Ramesh Annachhatre v DCIT ITATHelps taxpayerValidity unconfirmed
  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.
• Sameer Kishore Koticha v DCIT ITATHelps taxpayerValidity unconfirmed
  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.
• Abeezar Faizullabhoy v CIT(A)-28 ITATHelps taxpayerValidity unconfirmed
  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.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.