Govt CC for possession not required to claim tax break: ITAT

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that to claim a deduction of interest against a home loan, a taxpayer is not required to submit a completion certificate from any government authority as proof of having obtained possession within the stipulated time period. A certificate from the housing society was held to be sufficient evidence by the ITAT, which adjudicates income-tax disputes.

This order will come as a major relief to home buyers, especially in Mumbai, who have been facing tax litigations relating to deductibility of interest on home loans.

Under Section 24 of the Income Tax Act, interest paid on home loans is allowed as a deduction, subject to a yearly cap of Rs 2 lakh. However, to claim deduction it is essential that the acquisition (possession) is obtained or construction of the residential property is completed within five years from the end of the financial year in which the loan was taken.

In this case before the ITAT, which pertained to 2006-7, Sudhakar S. Mody had purchased a flat from Marathon Realty by availing of a home loan from IDBI Bank. He claimed a deduction of Rs 1.5 lakh. However, the I-T officer asked Mody to furnish a completion certificate from a government authority. As this was not furnished, the claim for interest deduction was denied. This act of the I-T officer was upheld by the Commissioner of I-T (Appeals).

Mody appealed to the ITAT. The tax tribunal held that the taxpayer had obtained possession of the flat within the stipulated time period (the applicable time period in this case was three years from the end of the year in which the loan was taken). It added that: “The proviso to section 24 of the I-T Act, nowhere states that the taxpayer should furnish a completion certificate from the appropriate government authorities.”

Taken a home loan? ITAT’s order will help
WHAT THE LAW SAYS
*A taxpayer can claim tax deduction on interest paid against home loans.
*The interest allowed each year is subject to a cap, which is now Rs 2 lakh.
*To claim deduction, possession of the residential property must be obtained within 5 years from the end of the fiscal year in which loan was taken.

WHAT THE ITAT HELD
*A government certificate is not required under the I-T Act.
*Certificate from housing society was sufficient proof of possession of flat.

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