Interest on Replacement Housing Loan Deductible | ITAT

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Section 24(b) subsequent loan interest deduction

Case Details: Deputy Commissioner of Income- tax vs. Raghuleela Estates (P.) Ltd. - [2025] 174 taxmann.com 908 (Mumbai-Trib.)

Judiciary and Counsel Details

  • Amit Shukla, Judicial Member & Girish Agrawal, Accountant Member
  • Smt. Sanyogita Nagpal, CIT DR for the Appellant.
  • Madhur Agrawal for the Respondent.

Facts of the Case

The assessee originally took a loan from WGHPL to invest in property and subsequently repaid it by taking a loan from a bank. The assessee claimed a deduction under section 24(b) of interest paid on subsequent loans taken to replace old loans.

The Assessing Officer (AO) disallowed the claim on ground that the assessee had not claimed interest under section 24(b) for the assessment years 2011-12 to 2013-14 on the property which established that the assessee had made payments of borrowed loans for acquisition of the properties, hence, during the year there was no question of claiming deduction

The Commissioner (Appeals) allowed the claim of the assessee. The matter reached before the Mumbai Tribunal.

ITAT Held

The Tribunal held that it is an undisputed fact that the assessee earned rental income offered to tax under the head ‘Income from House Property’ from its three properties, which were held as investments in the assessee company prior to amalgamation. The property was acquired by the assessee by virtue of the amalgamation of WARPL.

The assessee submitted that it is not in dispute that the loans were initially used to acquire/construct the property. Interest on the same was allowed as a deduction in earlier years, and the same were replaced time and again for better interest rates and an increase in the sanction limits. The subsequent loans were for replacing the existing loans and for general corporate purposes.

Since the loans obtained subsequently were for replacing old loans, the interest paid on such loans was claimed as a deduction under section 24(b) while computing income from house property. He also relied upon and referred to CBDT Circular No. 28 dated 20-8-1969, which clarifies that fresh loans raised to repay the earlier loans taken on the property, then the interest paid on the subsequent loan shall be allowed as a deduction.

The circular does not restrict the second or third loan from being eligible for deduction under section 24 (b). He further submitted that all the sanction letters were filed before the AO for subsequent loans, noting that the loan was taken to repay earlier loans.

Since it was clear that subsequent loans were taken to repay earlier loans used for acquisition/construction of the properties, there is no infirmity in the order of the Commissioner (Appeals) and the same is confirmed.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied