Income Tax Appellate Tribunal - Pune
Krishnan Kuppuswami vs Income-Tax Officer on 5 May, 1993
Equivalent citations: [1993]47ITD134(PUNE)
ORDER
T.A. Bukte, Judicial Member
1. This is an appeal by the assessee which is directed against the order of the Dy. CIT (A), Pune Range, Pune, dated 31-10-1991 wherein he has confirmed the order of the ITO passed under Section 154 of the Income-tax Act, 1961. The assessee had taken a specific ground that the Dy. CIT (A) erred in law of disallowing the claim under Section 80C(2)(h) of the Income-tax Act, 1961.
2. The assessee is a salaried employee working in PEICO Company. The assessee filed a completion certificate in respect of a flat purchased by him along with the return and claimed a deduction under Section 80C(2)(h)(ii) of the Act. The assessee had borrowed the money from HDFC who has issued a certificate stating that the principal amount of Rs. 2,910 and interest of Rs. 12,473 has been paid by him. In this case original assessment was completed under Section 143(1)(a) on 16-2-1990 and a refund of Rs. 1,370 was granted on 19-2-1990 as against refund claim of Rs. 2,588. While completing the assessment, assessee's claim of deduction under Section 80C for amount of repayment of principal amount of Rs. 9,664 was disallowed as no proof regarding completion of property after 1-4-1987 was attached with the return. The assessee moved an application dated 9-5-1990 requesting to rectify the assessment on the ground that the property was completed after 1-4-1987 for which a copy of completion certificate was produced.
3. However, the claim of the assessee was rejected by the Assessing Officer vide his order dated 6-11-1990 passed under Section 154 of the Act, for the detailed reasons.
4. On appeal, the Dy. CIT (A) confirmed the order of the ITO passed under Section 154 and did not find any good reasons to intefere with the said order. Hence the appeal by the assessee to the Tribunal.
5. ave heard the learned representative for the assessee Shri K.G. Vyas and the learned departmental representative Shri A.K. Khaladkar. Their arguments have been taken into account.
6. After going through the record and legal position, I find that the Dy. CIT (A) was not justified in confirming the order of the ITO passed under Section 154 of the Act. Section 24 of the Act envisages deductions from income from house property. It reads as under :
24(1) Income chargeable under the head 'Income from house property' shall, subject to the provisions of Sub-section (2) be computed after making the following deductions, namely :
(i) in respect of repairs-
(a) where the property is in the occupation of the owner, or where the property is let to a tenant and the owner has undertaken to bear the cost of repairs, a sum equal to one-sixth of the annual value;
(b) where the property is in the occupation of a tenant who has undertaken to bear the cost of repairs-
(i) the excess of the annual value over the amount of rent payable for a year by the tenant; or
(ii) a sum equal to one-sixth of annual value, whichever is less;
Section 80C(2)(h)(ii) of the Act reads as under :
For the purposes of purchase or construction of a residential house property the construction of which is completed after 31-3-1987 and the income from which is chargeable to tax under the head 'Income from house property' (or which, if it had not been used for the assessee's own residence, have been chargeable to tax under that head) where such payments are made towards or by way of-
(a) any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or
(b) any instalment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or
(c) repayment of the amount borrowed by the assessee from -
(1) the Central Government or any State Government; or (2) any bank, including a co-operative bank; or (3) the Life Insurance Corporation; or (3A) the National Housing Bank; or (4) any public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes which is approved for the purposes of clause (vii) of Sub-section (1) of Section 36, or (5)...
Admittedly, the assessee borrowed money from the HDFC and paid certain amounts by way of interest and principal amount. Initial deduction of Rs. 5,000 is allowable under Section 24. The assessee paid Rs. 12,473 as interest and Rs. 2,190 as principal amount. Allowing the deduction of Rs. 5,000 from interest payment the balance comes to Rs. 7,473. As per Section 80C(2)(b) the amount of principal amount of Rs. 2,190 as well as the balance amount of interest of Rs. 7,473 is allowable, as claimed by the assessee. The provisions of Section 88(2)(xv) w.e.f. 1-4-1.993 also support the allowance.
7. At the time of hearing, the learned representative for the assessee placed reliance on a judgment of House of Lords in the case of Paton (Fenton's Trustee) v. Inland Revenue Commissioners wherein the House of Lords affirmed the decision of the Court of Appeal. In that case interest was added to principal at the end of each half-year. Whole amount was treated as principal for next half year. The House of Lords held that it amounted to payment of interest. The learned representative for the assessee also relied on the judgment of the Supreme Court in the case of Chandulal Harjiwandas v. CIT [1967] 63 ITR 627 wherein it has been held that the assessee was entitled to claim the rebate on the premia paid during his minority. In spite of the clauses for payment of moneys to the proposer in certain events, the contract was in substance a contract of life insurance with regard to the life of the assessee. The learned departmental representative invited my attention to the Board Circular No. 495 dated 22-9-1987 reproduced in [1987] 168 ITR (St.) 106.
8. After considering the legal aspects on the issue, I am of the opinion that the Dy. CIT (A) was not justified in confirming the order of the ITO passed under Section 154 denying the claim of the assessee. The assessee is entitled to claim the deduction under Section 80C(2)(h) of the amount of Rs. 7,473 as stated hereinbefore.
9. In the result, the assessee succeeds and the appeal is allowed.