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.

• 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.
• Syeda Bibi Sadiqa v DCIT ITATHelps taxpayerValidity unconfirmed
  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 departmentValidity unconfirmed
  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 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.
• 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 taxpayerValidity unconfirmed
  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.