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T. Banusekar

I AM A teacher. I have taken a housing loan from Shikshak Pat Sanshta. I had claimed interest on the loan as a deduction and also claimed rebate under Section 88 on the principal repayment. The house is self-occupied.

As a result of claiming the interest, the house property income was negative, that is, it was a loss. The assessing officer (AO) has denied the benefit of deduction not only in respect of the interest but also the rebate under Section 88.

Is he right in doing so? What is my remedy in this case?

V. D. Datar

Reply

The interest that is payable should definitely be allowable as a deduction so long as the loan has been taken for purchase, construction, repairs, renewals or reconstruction of the house property. It may be noted that this will result in a loss under the head `house property' if you have only one property which is self-occupied. This will be so since the annual value of the property will be taken as nil.

Since the property is self-occupied, the interest would be allowed only subject to the limits in Section 24. Insofar as the rebate is concerned, the same will be available under Section 88 if the amount is borrowed from certain institutions, the Government or a bank or from your employer, if the employer is a company, university, and so on.

From the query it is not clear whether the loan is taken from any such persons. If it is so, the rebate should be available so long as the sum has actually been repaid in the previous year in question. Otherwise, the same cannot be allowed. It may be noted that interest will be allowed even if it is not actually paid in the previous year.

Your remedy will lie in filing an appeal under Section 246A before the Commissioner of Income Tax (Appeals), by way of a revision petition under Section 264 before the CIT or if the mistake is apparent on the record by way of a rectification petition under Section 154 before the assessing officer.

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