The Income Tax Appellate Tribunal (ITAT) Panaji bench has ruled that a Goa homebuyer can claim a tax deduction under Section 80C for home loan principal repayment, even if the loan is from a co-operative credit society. This decision overturned the tax department’s denial of the deduction, which argued that the specific co-operative society was not listed among eligible institutions in the law. For more details, visit economictimes.com.

A homebuyer from Goa faced two significant issues with the income tax department when his claim for a Section 80C tax deduction related to home loan repayment was denied and the home loan amount was classified as unexplained cash credit under Section 69.

His total home loan amount was Rs 4.81 lakh which he secured from a local co-operative bank to fund his home purchase and he also claimed the Section 80C tax deduction. Under Section 80C, eligible taxpayers can claim a deduction of up to Rs 1.5 lakh for the principal component of their home loan.

The problems, as it was described by the income tax department in the tax notice sent to him, were that the bank which credited the home loan amount to his account was questioned regarding its capacity to give out home loans under Section 80C(2)(xviii)(c).

The tax officer believed that the bank is not among the entities or individuals specified under Section 80C(2)(xviii), as it was unclear whether this bank is authorized to provide housing loans. Thereby, the tax officer denied the deduction claim of Rs 1.5 lakh under Section 80C. The tax officer assessed his total income at Rs 10,94,109 and passed an order under Section 147 read with Section 144B on March 23, 2022.

Furthermore, for the Assessment Year 2016-17, he had not filed any income tax return (ITR). The tax officer learnt from various sources that he had deposited substantial amounts of cash into his bank account in FY 2015-16. This led the tax officer to suspect that there was income that had escaped assessment, prompting him to issue a Section 148 tax notice. Subsequently, Section 142 (1) notice along with a detailed questionnaire was also issued to this homebuyer.

Feeling aggrieved, the home buyer initially filed an appeal before the CIT (A) but after losing the case there, he took his case to ITAT Panaji.