The ITAT Panaji accepted the appellant’s claim for deduction under Section 80C, observing that the Urban Co-operative Credit Society Ltd. was engaged in providing credit facilities, including housing loans, to its members, and the appellant had duly produced a certificate from the society confirming the loan’s purpose and repayment, which remained unchallenged by the Revenue Department.
The Tribunal held that for the purposes of Section 80C(2)(xviii)(c) of the Income Tax Act, repayment of a loan taken from a co-operative society engaged in providing housing finance to its members qualifies for deduction. Since the appellant (taxpayer) substantiated his claim with credible documentation and the AO failed to disprove the loan’s authenticity, the deduction under Section 80C deserves allowance.
A Single Bench of Pavan Kumar Gadale (Judicial Member) therefore partially ruled in the homebuyer’s favour by allowing the Section 80C home loan’s principal component tax deduction claim. At the same time, the Bench did not give a conclusive finding on the issue of unexplained expenditure under Section 69C and noted that while the respondent had submitted certain supporting documents, these were not examined.
To ensure fairness, the Bench remanded the matter back to the AO for verification of the evidences including the source of funds and linkage with business sales or savings and directed that the appellant be given an opportunity to substantiate his claim.
Briefly, in this case, the appellant faced additions under Section 69C for unexplained expenditure towards repayment of a housing loan, and disallowance of deduction under Section 80C for repayment of the same loan. Upon receiving information of substantial bank deposits, the AO reopened the case under Section 147, and the appellant explained that the housing loan repayments were made to Urban Co-operative Credit Society, funded from his business sales and savings.
The AO, however, treated the repayment of Rs 4.81 lacs as unexplained expenditure under Section 69C, holding that the source of such repayment was not satisfactorily substantiated. The AO denied the claim of deduction under Section 80C amounting to Rs. 1.50 lacs reasoning that the credit society was not among the specified institutions eligible for housing loan repayment benefits under Section 80C(2)(xviii)(c).
Appearances:
Shyam Jagannath Kamat, for the Appellant/ Taxpayer
Ish Gupta, for the Respondent/ Revenue
