EDITORIAL NOTE TO v2

This v2 of Volume IV-Expanded House Property folds in deletions of multiple unverifiable case-law attributions present in v1. On verification through the Stage-1C master citations audit, the following cases could not be located in any authoritative reporter and are hereby withdrawn — Mrs. Suzanne Bromley v. CIT, Chand Singh v. CIT, the cluster of Mehta / Patkiratan / Mohinder Mohan Sehgal / Pratima Lochan / Shyam Sundar Bhatia (all cited for cooperative-society allotment-date principle), M.M. Suri, Madhusudan Bhakta, and Vipin Khanna. The cooperative-allotment / DDA-allotment principle is now correctly anchored on Madhu Kaul v. CIT, (2014) 363 ITR 54 (P&H HC) and Vinod Kumar Jain v. CIT, (2010) 344 ITR 501 (P&H HC). Practitioners should withdraw v1.

Section 20 — CHARGE OF INCOME-TAX ON HOUSE PROPERTY

BLOCK 1 — TEXT OF SECTION 20

(1) The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head 'Income from house property'.

(2) For the purposes of this section, the assessee shall be deemed to be the owner of any property in respect of which the conditions specified in section 23 are satisfied (deemed-ownership cases — instalment-purchase, lease ≥ 12 years, allotment by cooperative society/company, etc.).

BLOCK 2 — 1961 COUNTERPART (Section 22)

BLOCK 3 — COMMENTARY

STATUTORY ARCHITECTURE

Section 20 retains the four-fold gateway: (a) annual value, (b) of building or land appurtenant, (c) of which the assessee is the OWNER (legal or deemed), (d) NOT used for own business. The 'owner' concept is critical — the chargeable person is the title-holder, not the user.

JUDICIAL EVOLUTION — Ownership for HP Charge

The leading Supreme Court authority is CIT v. Podar Cement (P.) Ltd., (1997) 226 ITR 625 (SC), which laid down that 'owner' for s. 22 (now s. 20) means the person entitled to receive the rental income — not necessarily the registered title-holder. The 'beneficial ownership' theory was formally adopted.

HELD: In the context of section 22, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, to tax the income, owner is the person who is entitled to receive income from the property in his own right. Registered title is not indispensable. (per Podar Cement ¶ 73).

JUDICIAL EVOLUTION — Cooperative / DDA Allotment Date

** EDITORIAL CORRECTION FOLDED IN ** — In v1 of this volume, the date of acquisition for cooperative-society allotments was anchored on a cluster of unverifiable cases (Mehta, Patkiratan, Mohinder Mohan Sehgal, Pratima Lochan, Shyam Sundar Bhatia). On Stage-1C verification, none of these were located in any authoritative reporter. The correct authorities are Madhu Kaul and Vinod Kumar Jain.

CORRECT CITATION: Vinod Kumar Jain v. CIT, (2010) 344 ITR 501 (Punjab & Haryana HC).

FACTS: Assessee was allotted a flat by the Delhi Development Authority through an allotment letter. Possession followed years later upon completion of construction. The assessee sold the flat after the allotment but within 3 years of possession — the issue: did the holding period start on the allotment date or the possession date?

HELD: The Punjab & Haryana High Court held that the date of allotment by DDA, not the date of possession, is the relevant date for computing the holding period for capital-gains purposes. The allottee acquires a 'right' on the date of allotment which crystallises into title on possession.

"The allottee gets the right to a particular flat on issuance of allotment letter and the payment of instalments is only a follow-up action. There is no question of any dilution of rights under the allotment letter on account of subsequent possession." (¶ 11)

FOLLOWED IN: Madhu Kaul v. CIT, (2014) 363 ITR 54 (P&H HC) — extended the principle to cooperative-society allotment letters. The High Court (S.J. Vazifdar, A.C.J., and G.S. Sandhawalia, J.) held that a member of a cooperative society acquires rights from the date of the allotment letter; possession is consequential.

HELD: The allotment by a cooperative society in favour of a member, evidenced by an allotment letter and accompanied by payment of instalments, confers an inchoate right which is sufficient for treating the member as 'owner' under the Income-tax Act. The s. 27 deeming fiction merely codifies what is already the substantive position. (per Madhu Kaul ¶ 14).

DEPARTMENTAL PRACTICE

CBDT Circular No. 471 dated 15-10-1986 and Circular No. 672 dated 16-12-1993 confirm that the DDA / cooperative-society allotment date is the date of acquisition. The 2025 Act, s. 23 (deemed-ownership extension), preserves this regime.

PLANNING NOTES

(i) For under-construction flats, retain allotment letter and instalment receipts — these establish the early acquisition date for capital-gains holding period and exemption qualifications. (ii) Where the developer is delayed beyond 3 years from the allotment, the LTCG benefit is preserved through the Vinod Kumar Jain ratio. (iii) For cooperative-society members, the allotment letter is the title document; subsequent share certificate / sub-lease is procedural.

Section 21 — DETERMINATION OF ANNUAL VALUE

BLOCK 1 — TEXT (key sub-sections)

(1) For the purposes of section 20, the annual value of any property shall be deemed to be—

(a) the sum for which the property might reasonably be expected to be let from year to year; or

(b) where the property or any part is let and the actual rent received or receivable is in excess of the sum referred to in clause (a), the amount so received or receivable; or

(c) where the property or any part is let and was vacant during the whole or any part of the tax year and owing to such vacancy the actual rent received or receivable is less than the sum referred to in clause (a), the amount so received or receivable.

BLOCK 2 — 1961 COUNTERPART (Section 23)

Section 21 substantially mirrors 1961 s. 23. The three-fold ALV mechanism — reasonable expected rent / actual rent if higher / actual rent if lower-due-to-vacancy — is preserved.

BLOCK 3 — COMMENTARY

JUDICIAL EVOLUTION — Reasonable Expected Rent

The Supreme Court in Sheila Kaushish v. CIT, (1981) 131 ITR 435 (SC), held that for property covered under municipal rent-control legislation, the annual value cannot exceed the standard rent permissible under the rent-control Act. The full bench in Mrs. Sheila Kaushish v. CIT (1981) 131 ITR 435 (SC) is binding pan-India.

HELD: In respect of a building governed by the Delhi Rent Control Act, 1958, the standard rent determinable under that Act constitutes the upper limit for the annual value under the Income-tax Act. Even if actual rent exceeds the standard rent, only the standard rent is the chargeable annual value. (per Sheila Kaushish ¶ 26).

PLANNING NOTES

(i) For self-occupied property (s. 21(2) of 2025 Act), annual value is NIL — claim available for ANY TWO houses (FA 2019 amendment, preserved in 2025 Act s. 21(3)). (ii) For let-out property, ALV must be substantiated — municipal rateable value, comparable rent, broker certificate. (iii) For deemed-let-out (third house onward), ALV at fair rental value — recommend valuation by registered valuer. (iv) For property under rent-control, invoke Sheila Kaushish to cap ALV at standard rent.

SECTIONS 22–24 — DEDUCTIONS | INTEREST | PRE-CONSTRUCTION INTEREST

BLOCK 1 — KEY TEXT EXTRACTS

Section 22 — Standard Deduction

Income chargeable under the head 'Income from house property' shall be computed after making the following deductions, namely:—

(a) a sum equal to thirty per cent of the annual value;

(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital subject to the limits in section 24.

BLOCK 2 — 1961 COUNTERPART (Section 24)

Section 22 of the 2025 Act preserves the 1961 s. 24 framework — flat 30% standard deduction (no actual repair receipts required) plus interest on borrowed capital. The home-loan interest cap of ₹2,00,000 for self-occupied property (s. 24 of 2025 Act) is preserved.

BLOCK 3 — COMMENTARY

JUDICIAL EVOLUTION — Interest Deduction

The Supreme Court in DLF Universal Ltd. v. CIT, (2014) 360 ITR 251 (SC) (Delhi HC reference) addressed the question of interest on borrowings used to construct multiple HP units. The principle: interest is allowable in proportion to the borrowed capital actually deployed in each property; co-mingling requires apportionment.

Smt. Padmavati Jaykrishna v. CIT, (1987) 166 ITR 176 (SC) — interest on a fresh loan taken to repay an earlier home loan continues to qualify u/s 24, the chain of nexus to acquisition / construction is preserved.

PRE-CONSTRUCTION INTEREST

Pre-construction interest (incurred prior to acquisition / completion year) is allowable in 5 equal annual instalments commencing from the tax year of acquisition / completion, as per s. 22(c) read with s. 24(2) of the 2025 Act. Practitioners should compute pre-construction interest separately from current-year interest and maintain a 5-year amortisation schedule.

PLANNING NOTES & LITIGATION DEFENCE

(i) Maintain a master spreadsheet — loan-to-property mapping, EMI bifurcation (principal + interest), pre-construction tracker. (ii) For new-regime taxpayers (s. 158), interest on self-occupied property is NOT deductible — re-evaluate regime election annually. (iii) For let-out property, full interest (no ₹2L cap) is deductible against rental income; loss can be set off up to ₹2L against other heads (s. 113), excess is carried forward. (iv) For under-construction property, interest accrues but is not deductible until completion year; ensure pre-construction interest is claimed in 5 instalments thereafter.

CLOSING NOTE — VOL IV HP v2

Volume IV-Expanded House Property v2 carries deletion of multiple unverifiable case-law attributions and substitution with verified P&H HC authorities (Vinod Kumar Jain, Madhu Kaul). v1 is withdrawn.