Law:

Section:

Section 26, read with section 24(1)(vi), of the income-tax act, 1961-Income from house property - Property owned by co-owners-Assesses was one of co-owners of a property in which all co-owners had equal, definite and determined shares-Assessee personally borrowed money to contribute his share of cost of construction of said property-Later all co-owners collectively raised loan from bank for construction of said property-Whether interest on latter loan allowable while computing net income from said property for allocation amongst co-owners-Held. Yes-Whether interest on loan raised by assessee personally allowable while computing his net income from house property after allocation of his share in the aforesaid manner-Held, yes Facts The assessee, along with five other co-owners, started construction of a property. The assessee contributed part of his share of the capital with borrowed money. Due to inadequacy of funds, all the six co-owners raised further funds from a bank by mortgaging the property under construction. The construction of the property was completed with the shares of all the six co-owners being definite and equal. In respect of income from this property, the ITO made an assessment against all the six co-owners, treating them as an association of persons. He computed the income after deducting the interest paid by the six co-owners to the bank on the loan collectively raised by them for the further construction of the property. One sixth of the income so computed was transposed by him to the assessee's assessment. He, however, rejected the assessee's claim under section 24(1)(vi) for the deduction of the interest paid by him on the loan individually raised by him for the acquisition and construction of his one-sixth share in the property on the ground that such deduction was not permissible under section 26. On appeal, the A AC allowed the deduction of the interest paid by the assessee on the loan individually taken by him. On second appeal, the Tribunal upheld the decision of the AAC. The Tribunal observed that the deduction claimed by the assessee had to be given in addition to the deduction of the interest amount paid on the loan taken…

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