Appeal partly allowed on deduction claim for housing society payment under Income-tax Act

The Tribunal allowed the appeal partly, focusing on the deduction claim under section 80C(2)(h)(ii)(b) of the Income-tax Act, 1961. It held that the appellant's payment towards a flat in a housing society, where construction was completed after a specified date, qualified for deduction. The Tribunal emphasized that the term "chargeable" in the provision referred to potential income, not just actual income, under the head "Income from house property." As the appellant met the conditions by paying the installment and the construction being completed post the specified date, the Tribunal directed the ITO to grant the necessary relief.

---

---

Issues:
Claim for deduction under section 80C(2)(h)(ii)(b) of the Income-tax Act, 1961.

Analysis:

The appeal was made against the order passed by the CIT(A) on various grounds, with the main issue being the claim for deduction under section 80C(2)(h)(ii)(b) of the Income-tax Act, 1961. The appellant, an Advocate and member of a housing society, had paid an installment towards a flat allotted to him during the assessment year under consideration. The ITO rejected the claim as the flat's construction was not completed during that year, and no income was taxable under the head "Income from house property." The DCIT(A) upheld the decision ex parte due to the appellant's non-cooperative attitude. The appellant only pressed the ground related to the deduction claim during the hearing, leading to the Tribunal's consideration of this main issue.

The relevant provision of the Act, section 80C(2)(h)(ii)(b), allows deductions for payments made towards the purchase or construction of a residential property where the construction is completed after a specified date. The appellant argued that the flat's possession occurred in a subsequent year, and the term "chargeable" in the provision did not require actual income but potential income under the head "Income from house property." The appellant satisfied the conditions of the provision by paying the installment to the housing society, and the construction was completed after the specified date.

The learned D.R. contended that no deduction was allowable until construction completion and physical possession. However, the Tribunal found merit in the appellant's arguments. It noted that the provision required completion of construction after a specific date and income being chargeable under the head "Income from house property." The Tribunal agreed with the appellant that the term used was "chargeable," not "charged," indicating potential income. It also recognized the common practice of possession being granted only after full payment, making the deduction provision workable. The Tribunal held that the appellant's claim met the provision's conditions and directed the ITO to allow the necessary relief. Consequently, the appeal was partly allowed, focusing on the deduction claim under section 80C(2)(h)(ii)(b) of the Income-tax Act, 1961.

---