The appeal involves Gurpreet Singh Dhillon challenging the disallowance of interest on a housing loan for a property let out for rent, claimed against rental income for the assessment year 2018-19. The central issue revolves around the applicability of tax provisions on deductions for interest on borrowed capital used for income-generating purposes.
The case addresses the interpretation of Section 24 related to the deductibility of interest on borrowed capital, specifically whether the third proviso applies to let-out properties. The appellant contested the decision of the CIT(A) that upheld the disallowance by the assessing officer.
The tribunal’s decision focused on the correct application of tax laws regarding the deductibility of interest and the treatment of notional interest on interest-free security deposits. The judgment highlighted the legal nuances in distinguishing between ‘self-occupied’ and ‘let-out’ properties under tax statutes.
The tribunal overturned the CIT(A)’s decision, ruling in favor of the appellant. It emphasized the legitimacy of the deductions claimed for the interest on the housing loan, correcting the misapplication of tax provisions by the lower authorities.
The decision is significant for taxpayers and real estate investors, providing clarity on the tax treatment of interest deductions for let-out properties and reinforcing the principles of natural justice in tax assessments.
The final judgment was pronounced on September 25, 2023, allowing the appeal and directing the correction of the tax record to reflect the rightful deductions.
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