Possession is not precondition to claim interest deduction under section 24(b)

Mumbai ITAT held that an assessee shall be entitled to claim deduction of any interest payable on capital borrowed by him for acquiring, constructing, repairing, renewing or reconstructing a property for claiming deduction of interest under section 24(b) and there is neither any precondition nor any eligibility criteria prescribed that assessee should have taken possession of property so purchased or acquired by him.

Section 24 provides as under:

24. Income chargeable under the head “Income from house property” shall be computed after making the following deductions, namely: -
(a). .....................................................................................................................
(b). Where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:

Considering the above provision, the Tribunal held that

Although, as per the plain literal interpretation of Sec. 24(b) of the Act there is no bar on an assessee to claim deduction of interest payable on a loan taken for purchasing a residential property, though, the possession of the same might not have been vested with him, however, even otherwise the logic given by the CIT(A) for declining the aforesaid claim of deduction of the assessee clearly militates against the mandate of Sec. 22 to 24 of the Act. Accordingly, as in the case before us the assessee had admittedly paid interest of Rs. 2,69,842.12 on the capital that was borrowed by him for acquiring the property in question, which was duly evidenced on the basis of the certificate that was filed in the course of the assessment proceedings, therefore, we are unable to concur with the lower authorities who had declined his aforesaid claim for deduction of interest under Sec. 24(b) of the Act. We, thus, not finding favor with the view taken by the CIT(A) therein set-aside his order and direct the A.O to allow the assessee‟s claim for deduction of Rs. 2 lac under Sec. 24(b) of the Act.

Citation: ITA No.4831/MUM/2019