Section 24

Section 24 — the law in short

What the courts have decided on section 24, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• All India Central Bank Officers Federation v Union of India High CourtHelps departmentNo later treatment found
  My client is a bank officer taxed on a deemed concession in rent for the bank's quarters even though the market rent is lower than the percentage of salary applied. Is the deeming provision open to challenge?
  Not on the grounds run so far. A Division Bench of the Bombay High Court dismissed a batch of writ petitions by bank officers' associations challenging Explanations 1 to 4 below s.17(2) inserted by the Finance Act 2007 with limited retrospective effect. It held the legal fiction is not an impermissible legislative override of Arun Kumar v Union of India, that the retrospectivity is valid, and that classifying by city population and measuring the concession as a percentage of salary does not offend Article 14.
• Oberoi Building & Investment (P) Ltd v CIT-II, Kolkata High CourtHelps taxpayerNo later treatment found
  I hold shop space under a fifty-year leave and licence and sub-licence it with services. The Assessing Officer says the fifty-year term makes me a deemed owner under section 27(iiib) and taxes the receipts as house property income. How do I answer that?
  The Calcutta High Court allowed the assessee's appeal and answered both substantial questions in its favour, holding that the income from sub-licensing was business income and not income from house property. The Court reached that conclusion on the objects and the actual activity of the company, and held that the Tribunal had committed a manifest error of law in ignoring the company's objects and business activity and in misunderstanding the nature of a sub-licence transaction.
• PSTS Heavy Lift and Shift Ltd v DCIT (heard with CeeDeeYes IT Parks P Ltd) High CourtHelps taxpayer
  My company's only business is letting its warehouses and its IT park. The Assessing Officer has taxed the rent as income from house property and knocked out my depreciation. Can I get it assessed as business income?
  Yes, where letting the property is the company's sole and exclusive business. The Madras High Court held that once the property is a business asset and the exclusive business of the company or firm is to earn rental or lease money, that rent can only be business income, and it answered the question of law in the assessee's favour for both a warehousing company and an IT park company.
• CIT v Sunil Kumar Sharma High CourtHelps taxpayerHigh Courts differ
  I bought a site from a government body on instalments and pay interest on the unpaid instalments. There is no bank and no loan document. The officer says there is no borrowed capital, so no s.24(b) deduction. Is he right?
  No. Where a buyer agrees with the seller to pay the price in instalments carrying interest, the seller becomes the lender as regards the unpaid purchase price and the buyer becomes the borrower, and the unpaid purchase price is borrowed capital for s.24(b). The Punjab and Haryana High Court held the interest component of the instalments deductible and dismissed the Revenue's appeals.
• Arihant Developers v ACIT ITATHelps departmentNo later treatment found
  I build godowns, hold them as stock in trade and let them out. I have offered the rent as house property income and taken the thirty per cent under section 24(a). The Assessing Officer has recast it as business income. Can he do that when I am the owner and the rent is plainly rent?
  On these facts yes, and the Tribunal dismissed all four appeals. Where a firm constructs godowns and lets them out in an organised manner as its only activity, the receipts are business income under section 28 and not annual value under section 22, so the section 24(a) deduction is not available. The Tribunal expressly declined to apply CIT v Ansal Housing Finance & Leasing Co. Ltd., holding it to be about notional annual letting value on unsold flats and not about a business of letting warehouses.
• Classic Mall Development Company Ltd v ACIT ITATHelps taxpayerNo later treatment found
  Eight units in my mall stayed empty for the whole year. The Assessing Officer relies on Vivek Jain and says section 23(1)(c) needs the unit to have been actually let during the year, so he has taxed deemed rent under section 23(1)(a). How do I meet that?
  The Tribunal held the annual value of units vacant for the whole year to be nil under section 23(1)(c) and deleted the addition of Rs 56,26,656. It construed the word 'let' in section 23(1)(c) purposively as meaning intended to be let or available to let, so that actual letting during the year is not a pre-requisite where the property was let in an earlier period, remained vacant for the whole year in question and continued to be held for letting. Counsel's submission that the Andhra Pradesh High Court's decision in Vivek Jain is a non-jurisdictional decision of persuasive force only was recorded at paragraph 8.3, and the Tribunal at paragraph 10 said it found force in the submissions of counsel and was in agreement with them; the Tribunal did not itself analyse the point.
• Deepak Kantilal Shah v DCIT ITATHelps taxpayerNo later treatment found
  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.
• Syeda Bibi Sadiqa v DCIT ITATHelps taxpayerNo later treatment found
  Is there a ceiling on the interest I can deduct on a house that is let out?
  No. The Tribunal held that the property was let out during the year — rent of Rs 4,74,69,381 having been received — and that there is accordingly no maximum limit on the deduction for interest on borrowed capital. The proof accepted was a certificate from the lending bank, supported by the same deduction having been claimed and allowed in earlier years, and by a finding that the loan had not been taken afresh for any renovation of the property.
• Rajesh Saluja v DCIT ITATHelps departmentNo later treatment found
  I am selling the house. Can I add the home loan interest to the cost of acquisition under s.48, with indexation, on top of whatever I claimed under s.24(b)?
  This Tribunal said no. Following the Supreme Court in CIT v. Tata Iron and Steel Co. Ltd., it held that the cost of an asset and the cost of raising money to buy the asset are two different and independent transactions, so interest on borrowed capital has no direct nexus with the property and cannot enlarge the cost of acquisition. The disallowance of Rs 1,16,43,521 claimed as indexed cost referable to interest of Rs 94,17,082 was upheld.
• Mangesh Ramesh Annachhatre v DCIT ITATHelps taxpayerNo later treatment found
  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 taxpayerNo later treatment found
  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 taxpayerNo later treatment found
  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.
• ACIT, Central Circle-26 v Ashok Kumar ITATHelps taxpayerNo later treatment found
  I do not own the property. I hold it on a lease running since 1989 and I sub-let it. The Assessing Officer says sub-letting income is income from other sources under section 56 and has denied me the thirty per cent under section 24(a). What is the answer?
  The Commissioner (Appeals) held, and the Tribunal proceeded on the footing, that where the lease is for a term of not less than twelve years section 27(iiib) read with section 269UA(f) makes the lessee the deemed owner of the property for sections 22 to 26, so that the sub-letting receipt is income from house property and the section 24(a) deduction follows; the Tribunal recorded that conclusion in its own words at paragraph 19 without separately construing the section. The Tribunal held that the Revenue, having assessed the rent under the house property head, could not deny the statutory deduction unless it was proved on record that the original owner had also claimed the benefit, and the Revenue's appeal was dismissed.
• Kohinoor Industrial Premises Co-operative Society Ltd v ITO ITATHelps taxpayer
  My society lets space on the terrace to cellular operators for their towers and antennae. The Assessing Officer says that is income from other sources and has disallowed the thirty per cent under section 24(a). Is he right?
  No, on these facts. The Tribunal held that the terrace is part of the house property, that letting space on it for installing and operating a mobile tower or antenna is letting a part of the house property itself, and that the receipt is therefore income from house property on which the section 24(a) deduction is allowable.
• ACIT v C Ramabrahmam ITATHelps taxpayerSuperseded by amendment
  I claimed housing loan interest under s.24(b) every year. When I sell, can the same interest also go into the cost of acquisition?
  Yes, on this Tribunal view - but the point is contested. The Chennai Bench held that a deduction under s.24(b) and the computation of capital gains under s.48 are covered by different heads of income and neither excludes the other, so interest already allowed against house property income may still be included in the cost when capital gains are computed. The Karnataka High Court has taken the opposite view.
• ITO v Smt. Parul Grover ITATHelps taxpayerNo later treatment found
  I refinanced. I took a fresh loan from another bank and used it to close my original house construction loan. The officer says the new loan was not taken for construction, so no s.24(b) interest. Is there authority against him?
  Yes. Where the second borrowing has really been used merely to repay the original loan taken for the house, interest on the second loan is deductible, and the Tribunal applied CBDT Circular No.28 dated 20 August 1969 to allow it. The deduction is confined to the part of the fresh loan actually traced to repayment of the original housing loan, worked out proportionately.

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.