DEduction for Interest on housing Loan

[GYAN JAIN]

One of My client claim interest on housing loan Rs 77541 and setoff against Interest Income under head other sources . The owner of the House is Father of the client and the repaymnet of interest and instalment was made by the client . The AO not allowed to set off the interest income and want to initiate penalty proceedings under section 271(1)c. Guide me

[DEV KUMAR KOTHARI]

Give full facts- how the flat is used - by assesses for business and profession or residence, nature of income of assessee under different heads- salary, business, other sources. Why loan including interest is paid by assessee though his father is owner. what is understanding between assessee and his father in this regard. Explore in what other manner interest can be allowed in hands of assessee by treating EMI (or at least interest element) as rent or a payment in lieu of rent. Explore how this can be claimed under any other provision as business expenses or a deduction u/c VIA. How the inadvertent mistake, if at all, took place- bonafide of claim to be established. otherwise addition and penalty both may be attracted.

AI Summary

Client's Deduction Claim Denied: Interest on Father's Property Loan Disallowed; Penalty Proceedings Under Section 271(1)c Considered A client attempted to claim interest on a housing loan as a deduction against interest income, but the property is owned by the client's father, and the client made the payments. The Assessing Officer disallowed the set-off and considered penalty proceedings under section 271(1)c. A respondent advised providing full details about the property's use, the client's income sources, and the arrangement with the father. Suggestions included treating the interest as rent or exploring other provisions for claiming it as a business expense or deduction. The importance of establishing the claim's bona fide nature to avoid penalties was emphasized.