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of <h1>Tribunal grants interest deductions, removes $40,000 cash deposit addition.</h1> <h3>Smt. Rama Bajaj Versus ITO, Ward-4 (2), Jaipur</h3> Smt. Rama Bajaj Versus ITO, Ward-4 (2), Jaipur - TMI Issues Involved:1. Disallowance of interest claimed under Section 24(b) of the Income Tax Act, 1961.2. Non-allowance of deduction of balance interest on housing loan against income from other sources.3. Addition of Rs. 40,000/- under Section 68 of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Disallowance of Interest Claimed under Section 24(b):The assessee claimed interest expenses of Rs. 5,06,678/- for a housing loan taken for constructing the second floor of a house. Initially, only Rs. 3,48,888/- was claimed under Section 24(b), with the balance interest of Rs. 1,57,790/- pertaining to the construction period inadvertently not claimed. The CIT(A) confirmed the AO’s decision to allow only Rs. 1,50,000/- on the grounds that the housing loan was not fully utilized for construction. The assessee argued that the loan was partly used for onward lending, generating interest income of Rs. 2,89,004/-, against which interest expenses of Rs. 2,74,705/- were claimed. The Tribunal concluded that the interest pertaining to the loan used for construction (Rs. 2,31,973/-) should be allowed under 'Income from house property,' and the interest for the loan used for onward lending (Rs. 2,74,705/-) should be allowed under 'Income from other sources.'2. Non-Allowance of Deduction of Balance Interest on Housing Loan Against Income from Other Sources:The assessee took a housing loan of Rs. 45,00,000/-, part of which was used for construction and part for lending. The AO allowed only Rs. 1,50,000/- as interest deduction for self-occupied property, disallowing the remaining interest. The Tribunal noted that the loan utilization was for both construction and lending, with interest expenses of Rs. 5,06,678/- incurred. The Tribunal allowed interest deduction of Rs. 2,31,973/- for the construction portion under 'Income from house property' and Rs. 2,74,705/- for the lending portion under 'Income from other sources.'3. Addition of Rs. 40,000/- Under Section 68:The AO added Rs. 40,000/- as unexplained cash credits, citing the lack of a cash book or cash flow statement. The assessee provided a cash flow statement showing an opening balance, cash withdrawals, rent received, and household and construction expenses, leaving a cash balance of Rs. 74,886/-, which explained the deposit. The Tribunal found the cash flow statement credible and directed the deletion of the Rs. 40,000/- addition.Conclusion:The appeal was allowed, with the Tribunal granting the claimed interest deductions under the appropriate sections and deleting the addition of Rs. 40,000/- for unexplained cash deposits.Order Pronounced:The judgment was delivered on 14/09/2021.
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