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Wednesday, 24 July 2013

Should India resort to Presidential System?

The ruckus in the Parliament over the Lokpal Bill makes one to think that whether this Westminster form of democracy is anymore suitable for India. 
The Westminster or Parliamentary form of Democracy has its roots in the United Kingdom.  In this form of democracy there is a Head of the State(The President in India) and a Head of the Government(the Prime-minister in India) and legislature. The Legislature can be unicameral(single House) or bicameral(two houses).  The lower House consists of elected representatives of the people and the Upper House consists of the representatives from States on proportionate basis.   The Lower House consists of Government benches(called Treasury Benches) and opposition benches. All the Bills are to be passed by both the houses through a simple majority whereas, any amendment in the Constitution can be brought about by two-thirds majority.
The Head of the Government i.e. the Prime-minister holds the maximum power in theWestminster model of democracy. The prime-minister is elected by the Elected Representatives of the People. Generally, the leader elected Party having the majority in the Parliament is designated as the Prime-minister. In case, no party is having majority, the group of parties coming together in an alliance and having majority can elect their Prime-minister. 
The main shortcomings of the Westminster Model of democracy are :- 
1. The Head of the Government is not chosen by the people directly. The people only  choose the party to vote for and the majority party then chooses the Prime-minister.
2. In case no party wins the majority, the system becomes unstable and the Government is at the mercy of smaller parties.
3. A good and popular leader cannot become the Prime-minister of the country just because its Party doesn’t have wherewithal(like money) to win a majority.
4. The people are forced to accept an unpopular person as the leader of the country just because his party has won the majority.
5. There is no limit i.e. the number of terms for which a person can become Prime-minister.
The other system of Democracy is Presidential system which has been adopted and perfected by the USA. In a Presidential System the people elect the President by voting for the candidate directly(leaving aside the fact that in USA that the votes are not counted directly but indirectly through an electoral college). The people also cast the votes for their representatives separately. That is to say that in Westminster model, there is only One Vote whereas in Presidential model, there are two votes. The President then forms his government through politicians or experts in the field. The political party to which the President belongs may or may not have majority in the House of people. If the party has majority ,then the task of the President becomes a bit easier. Otherwise, he uses his good offices to get the Bills passed in the House of People. 
India has chosen Westminster form of democracy because of its colonial connection withBritain. However, in a diverse country like India, Presidential form of democracy is more suitable because of the following :-
a. A leader from a smaller state like Goa has very little chance of becoming the PM as compared to the leader from a larger state like Uttar Pradesh.
b. Very able Regional Leaders cannot become the PM because their party is confined to one region only.
c. The person whom the people in general want to become their leader cannot do so because he is not backed by a political party large enough to attain majority.
d. The Westminster Model has resulted in Dynastic politics in India as political leaders transfer their legacy to their kith and kin and not to the party as such.
We have all seen the plight of Lokpal Bill in our system of democracy. Let us now see how it would have moved in a Presidential form of democracy :- 
  • · There was no need for Anna Hazare to resort to agitation or put force on the government of any kind.
  • · Any MP could have picked the Jan Lokpal Bill(made by Team Anna) and introduced in the Parliament for debate. The MP had to mobilise media and other channels to create a public awareness so that the other MPs take up the Bill seriously for discussions.
  • · The MPs after dissecting the Bill had powers to pass it as it is or reject it or pass it with amendments. The Bill cannot just linger on indefinitely because there was no political consensus amongst the parties.
  • · The Bill would have gone to the President for his accent. The President had veto powers to reject it or refer it back to the Parliament for modifications.
  • · Thereafter, the President has to either give his accent or veto it altogether.
There was no need of such blood-bath or so many lost days of the Parliament and the most acceptable form of the Bill could have emerged. 
Its therefore time now to start the debate whether India should switch over to Presidential form of Government.

Jurisdiction of Civil Court

In modern days, in almost every legal systems the civil disputes are resolved by the courts of civil jurisdiction. As a rule, the civil courts can take cognizance of every controversy of civil nature as the court of ultimate jurisdiction but there are some recognized exceptions to this general rule which is to be discussed through this work.

SECTION 9 OF THE CODE OF CIVIL PROCEDURE, 1908
Section 9 The Code of Civil Procedure, 1908 confers jurisdiction over the civil courts to adjudicate upon all suits of civil nature, except such suits the cognizance of which is either expressly or impliedly barred. In other words whenever the object of the proceedings is the enforcement of civil rights, a civil court would have jurisdiction to entertain the suit unless the cognizance of the same is barred through a legislative instrument.
The legislature, both Federal and Provincial, has placed bar on the exercise of jurisdiction of the civil courts through number of Acts, Ordinances and other legislative instruments. For example, section 172 of the West Pakistan Land Revenue Act, 1967 has placed embargo over the powers of civil court to adjudicate upon any matter in which the powers of adjudication has been given to the revenue authorities and same is the case of section 36 of the Colonization of Government Lands (Punjab) Act, 1912. Almost all the special tribunals has been given exclusive jurisdiction by the legislature to decide the matters fall within their domain and, as a rule, their decisions / actions are immune from scrutiny by the civil courts, but there are certain exceptions to this general rule.
As per the different judicial pronouncement on the subject, it has been established that the law requires the civil court to be jealous about their jurisdiction and it should not give away its right to hear and adjudicate upon the case of civil nature unless there is a clear bar imposed by the legislature.
In the leading decision of Secretary of State v. Mask & Co. (67 I.A. 222) the Privy Council observed:
“it is settled law that the exclusion of the jurisdiction of the civil court is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly implied”.
In Radha Kishan v. Ludhiyana Municipality 1963 AIR 1547, 1964 SCR (2) 273 it was held:
“Under section 9 of the civil procedure code the court shall have jurisdiction to try all suits of civil nature excepting suits of which cognizance is either expressly or impliedly barred. A statute, therefore, expressly or by necessary implication can bar the jurisdiction of civil courts in respect of a particular matter. The mere conferment of special jurisdiction on a tribunal in respect of the said matter does not in itself exclude the jurisdiction of civil courts. The statute may specifically provide for ousting the jurisdiction of civil courts; even if there was no such specific exclusion, if it creates liability not existing before and gives a special and particular remedy for the aggrieved party, the remedy provided by it must be followed. The same principle would apply if the statute had provided for the particular forum in which the remedy could be had. Even in such cases, the civil court’s jurisdiction is not completely ousted.”
Now I discuss the situations when the civil court may take cognizance of any matter notwithstanding the bar of jurisdiction.
MALACE AND MALA FIDE ATTRIBUTED TO THE FUNCTIONARIES ACTING UNDER SPECIAL LAWS:
In “Gul Shah and others Vs. Hafiz Ghulam Muhammad and others” (2009 SCMR 1058) the honorable Supreme Court of Pakistan has held that:
“Admittedly, under section 14 of Act XIII, 1975 the jurisdiction of Civil Court is ousted / barred, but the jurisdiction is barred in ordinary cases and when malice and mala fide is attributed to the official respondents, then the Civil Courts are the Courts of ultimate jurisdiction and they can decide the matter in accordance with law.”
In another case titled “University of Punjab Vs. Miss Wajuha Arooj” (2008 SCMR 1577) the august Supreme Court held that:
“Where the action or order passed by the public officer, tribunal or authorities is within the four corners of jurisdiction, the Civil Court cannot entertain the lis. But where the order passed or act done was void, or without jurisdiction, or mala fide, or in excess of jurisdiction, or otherwise not in accordance with law, or based on fraud, the civil Courts would have jurisdiction to interfere with the same.”
It is abundantly clear now that the Civil Courts can take cognizance of the matter irrespective of the barring clause in the special enactment, if the order or action is not qualified upon the criteria laid down by the Apex Court in the above mentioned cases.
WHEN SERIOUS QUESTION OF FACT IS INVOLVED IN THE CONTROVERSY:
There may be another situation when the Civil Court can take cognizance of the matter, notwithstanding the barring clause in the special law. In a case wherein serious question of facts are involved for the determination of which framing of issues and recording of evidence is necessary and the special tribunal has not been given such powers, then the civil court has the power to adjudicate upon the matter as the special tribunal has no power to effectively decide the fate of the matter in issue.
In “Muhammad Khan and others Vs. Province of Punjab and others” (2007 SCMR 1169) the honorable Supreme Court held:
“It is well settled by now that “a purely administrative officer, who is empowered to pass an order if certain circumstances exist, has no jurisdiction to determine those circumstances and the objective existence of those circumstances is an essential condition of the validity of his order. In respect of every order passed by him, the court can make an enquiry and if it finds that all the circumstances needed for passing the order were not present, it will declare the order to be void………… So far as special judicial tribunals are concerned they are given jurisdiction to determine certain fact but they are not judges of the facts which are the foundation of their jurisdiction nor can they define the limits of their own jurisdiction.”
WHEN AGGRIEVED PERSON BECOMES REMEDY LESS:
Almost all the special laws provide mechanism for assailing the order of the authority before the next higher authority. For instance, as per section 82D of the Banking Companies Ordinance, 1962 the Banking Mohtasib has been given authority to decide the complaint filed against any bank or its employee. The order of the Banking Mohtasib, as per section 82E (4) of the same Act, can be appealed against before the Governor State Bank within 30 days of the passing of the order by the Mohtasib. There may be a situation that the appellate authority is not available or is not appointed, then, what would be the remedy available to the aggrieved party if he feels aggrieved with the order and wants to challenge the same?
This same situation came under discussion in case titled “All Pakistan Textile Mills Association Vs. Federation of Pakistan” (PLD 2009 Lahore 494) before the honorable Lahore High Court and the court held that:
“In the present case, Association of Textile Manufacturers, subject to its locus standi undoubtedly had a right of appeal under the statute, which was the most sacred right, however, if for any reason the forum of appeal had not been established enabling the exercise of such valuable right, the right, could not be allowed to be frustrated or stultified, for the lapse on part of the Federal Government as it was the fundamental principle of law that the rights and the remedies of the parties could not be left in vacuum, thus, in the situation the Association (Subject to its locus standi) shall have an independent right to challenge any such order under Art. 199 of the Constitution, if it had been passed by a forum which could be construed to be a forum against which a writ of certiorari would lie, otherwise before the courts of plenary civil jurisdiction under S.9, C.P.C.”
NO FURTHER RECOURSE TO DEPARTMENTAL AUTHORITIES IN CASE OF VOID ORDER:
In special enactments the legislature provides the mechanism to check the actions of the authorities who perform their functions under the said statute. In almost all the special laws the provisions of appeals and revisions have been provided and in some of the statutes, powers of review have also been given to the authorities. For instance, in West Pakistan Land Revenue Act, 1967 (the Act), the revenue functionaries have been given powers to hear appeals against the orders of their sub-ordinate revenue officers (section 161 of the Act). The Executive District Officer (Revenue) and the Board of Revenue have also been given powers of revision (section 164 of the Act) and as per section 163 of the Act certain revenue officers have been authorized to review their orders.
In this situation the next question which may arise here is that whether a person who is aggrieved by the order passed by a special tribunal / administrative officer is bound to assail that order under the special law by filing appeal or revision before the functionary designated to hear the same under that law or he may approach the civil court on any admissible ground, without exhausting all the remedies provided under the special law. As per the general rule, the aggrieved person is bound to avail all the remedies provided under the special law before approaching the civil court, so that, even if the order is void the departmental authorities should rectify the error themselves. But there are also certain exceptions to this rule which were highlighted in Mohd. Latif Vs. Province of West Pakistan” (PLD 1970 SC 180). The honorable Supreme Court held that:
“There is no doubt that under section 11 of the Sindh Revenue Jurisdiction Act, 1876, ordinarily the party in revenue matters should exhaust all his remedies by way of appeal before invoking the aid of the civil Court. But there are different considerations where the allegation of the party is that the impugned order is a nullity in the eye of law. The civil Courts have jurisdiction to examine into cases where statutory provisions have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure.”
ABSOLUTE BAR OF JURISDICTION:
There are some instances that even mala fide or void-ab-initio orders of authorities cannot be questioned through filing a civil suit before the Civil Courts. If the bar is placed by the Constitution, which is the supreme law of the land then the jurisdiction of civil court would not be invoked in any situation, whatsoever.
As per Article 212 of the Constitution of Islamic Republic of Pakistan no court can take cognizance of the matter relating to the terms and conditions of civil servants except the service tribunals. There is also bar of jurisdiction of all the courts, except the tribunal established by legislation, in taxation matters. As per Article 225 of the Constitution, the elections of House or Provincial Assembly can only be challenged through election petition before election tribunals. All these matter are absolutely immune from scrutiny by the Civil Courts as the immunity is granted by the Constitution and the bar of jurisdiction is absolute without any exception. The question of invalidity of order or action for being mala fide and void etc. can only be raised before the special tribunals established by the legislature under the command of the Constitution or other remedy as provided by the Constitution itself.

CONCLUSION
In the light of the judgment of the superior court we may safely draw the following conclusion:
  1. Notwithstanding of the bar placed by the legislature over the jurisdiction of the civil court the civil court may take cognizance of case in the following circumstances;
  1. When the order / action has been taken in mala fide and malicious manner.
  2. When the order has been passed or authority has been exercised in excess of jurisdiction or without jurisdiction.
  3. When serious question of fact is involved which cannot be decided without recording the evidence.
  4. When the aggrieved person has become remedy less due to non availability of appellate authority.
We may also conclude that the aggrieved person is bound to exhaust all the remedies available under the special law but in case of order which is void and nullity in the eye of law, he may approach the civil court straight away while bypassing the remedies available to him under the law.
Finally in case of bar imposed under the Constitutional provisions, the civil court would not take cognizance of the matter on any ground, whatsoever.

Brief Notes on Competition Law in India

Competition laws requires  economics cum legal mind. A lawyer for competition law should have thorough understanding about how the market operates, macro economics and foresightedness for end result of competition in the situation of discussion. A laws was needed in India which ensure the implementation of free economic policies and free flow of  resources which protect the fair competition and restrict the anti-competitive practices.  We have discussed here what is anti-competitive practices are? but in short it can be said that any practices or tactics of business houses to acquire a dominance in market and eliminate the competition  is some thing called anti-competitive.

Competition Act 2002 which further amended by amendment act 2007 and 2009, the modified version on an Act which we earlier use to know by the name of MRTP Act 1969. MRTP Act 1969 is repealed by the virtue of section 66 as amended through the act of 2007. MRTP commission wound up. The cases of unfair trade practices are already covered under consumer protection act, hence, same got transferred to relevant consumer court.  As per section 66 of CA act the MRTP commission shall continue the operations for another period of two years and thereafter all the cases will stand transferred to Appellate tribunal (CAT) constituted under the Act. It is business law which control the fair competition in the market. This law prohibits the practice of price fixing among market players which it termed as enterprise. This law ensure that a dominant player should not abuse its dominant position in the market . It disallow all the agreements with a are anticompetitive in nature. Further it has brought the concept of ‘combination’ where on person who own a competitor enterprise can not get merger/amalgamation in a way which adversely effect the competition. This law constitutes a statutory body competition commission of india (CCI) which is fully functional from May 2009. CCI has vide powers to enter into the matters of the Act even without any application to it.  This act is directly affect to the top management of the company. It assume that the pricing and trade associations are in knowledge of top management. It lays down heavy penalty of the offense under this act.  Appellate tribunal is constituted to file appeal against the order of competition commission.

Competition laws is equally applicable on written as well as oral agreement, arrangements between the enterprises.

Components of competition laws:

Anti-competitive agreement: Section 3 of The Competition Act 2002 deals with the anti-competitive agreements.

An agreement which adversely effect the competition. It includes but not limited to: -

1. Agreement which limit the production.
2. Agreement which limit the supply.
3. Agreement to allocate market.
4. Agreement to fix prices.
5. Agreement to collusive bidding.
6. Conditional purchase (Or tie-in-agreements)
7. Refusal to deal.
8. Exclusive supply agreement.
9. Exclusive distribution agreement.
10. Condition sale agreement to by second products as well compulsorily.

Following are not an Anti competitive agreements:

1. Agreement to Protect IPRs. Viz trademark, copyright or patent.
2. Agreement to protect geographical indications.
3. Agreement to Design Act.
4. Agreement to lay out designs for Act 2000.
5. Agreement to export goods (with certain conditions).

Types of agreement : Competition law indentifies two type of agreement. First Horizontal agreements which are among the enterprises who are or may compete within same business. Second is the vertical agreement  which are among independent enterprise.  Horizontal  agreement is presumed to be illegal agreement but rule of reasons would be applicable for vertical agreements.

Abuse of Dominant Position:

1. It is the misuse of an advantageous position by an enterprise to gain extra benefits but which resultantly damage the consumer interest and make it difficult other players to compete.

2. Section 4 of Competition Act deals with abuse of dominant position.

It includes:- 3. Imposition of unjust conditions.

4. Imposition of unfair pricing.

5. Predatory pricing.

6. Create hindrance in entry of new operators.

7. Abuse of market positing.

Predatory Pricing:

Predatory pricing is some thing called pricing below then the cost of the product. The objective of pricing to elemenate the competition and then create dominant position in the market and put the price so high to recover the earlier losses. It is sort of abuse of dominant position. There are some methods in economics to establish that whether a pricing is predatory pricing or not. Once the predatory pricing is fixed then the CCI can pass a order that enterprise has abuse its dominant position in contravention of the competition act and pass the penal order for it.

Combination under Competition Act.:

Combination is legal concept of analyzing the merger, acquisition,  acquisition of an enterprise by a person having shares/ right to vote with the completion business enterprise. There are threshold limits are defined viz 1500 Cr. For individuals in India. If such combination, merger amalgamation create adverse impact on competition or consumer’s at large  then such combination it is prohibited by the competition law of India.

Notification: The desiring firm shall notify it is approval for combination to CCI within 30 days of such board resolution. CCI shall pass the order within 210 to give effect to such combination else it will deemed as approved after 210 days. In case such combination is not notified to CCI then CCI shall have powers to inquiry such combination within 1 years of merger.  Notification is pre-requisite else there will be risk from legal behavioral aspect and may attract investigation and objection.

Cartel:

Cartel is the group of enterprises which collectively make some agreement which adversely effect the competition. The agreement between the cartel may be explicit or implicit. But it is restricted by the competition law due the reasons of artificial price hike, collusive bidding,  competition law presumes the Cartel as injurious to competition. CCI has vide power to take the cartel in their cognizance and refer it to director general for investigation.  It further provides the penalty provision upto three times of yearly profit to the offenders.

Bid rigging:

Competition law provides on more legal concept and that is Bid rigging. This terms used for any manipulation, conspiracy, infiltration etc which adversely affect the biding. Any agreement or consent among the prospective bidder which affect the bidding process and causes or likely to cause losses to the purchaser, is termed as bid rigging. Competition law prohibits bid rigging and lays down provisions for penalty for such practices.

Rule of reasons:  It is the analysis of any activity under the challenge on the basis of business justification, competitive intent, market impact, impact on competition and on consumer. It is the logic behind the conclusion for any order.

Market Power: It is the power to control market pricing and restrict competition.

Competition Advocacy:

Competition advocacy is one of the most significant feature in the Act. It is the obligation of commission to create the awareness about the competition laws through non-enforcement measures. It also includes training programs, seminar, educational workshops.

Remedies  under the competition laws of India

Competition Commission of India is the statutory body to approach for unfair competition practices. The relevant Act is  Competition Act 2002 and its amendment act 2007. CCI has power to act suo-mot or on the reference from Government. Consumer can directly approach the CCI by filling an application with 5000/- prescribed fees in case of individual/huf/ngos. In case any case is made out then, on receipt of such application, the CCI shall refer it to Director General for opinion. Director General shall submit its report/finding to CCI for proper hearing and trial for the case.

About Fines & Penalty: The competition laws lays down heavy penalty of 10% of total turn over of preceding three years if any enterprises act or infringe the provision of competition act.

Snaps of Cases on  competition Act

1) Competition Commission of India Vs Steeal Authority of India, SC, 2010.

Order of investigation by CCI is not an appealable order under secton 53A(1). Commission has power to refer for investigation under section 26(1) of the Act. It may ask for the requisite details from the party or it may go ahead without asking for the same. It is the matter of discretion of commission.

2) The CCI is looking into the agreements of builders where they put the clause of 18% interest in delay in payments but lesser interest in delivery of possession.

3) The SAIL and Indian railway controversy settled by CCI on the basis of argument that they had previously settled arrangement way back in 2003 that SAIL would be the supplier for Indian railway.

4) CCI has suggested TRAI to consult them at the time of merger and acquisition of telecom service provider to ensure that any service provider should not abuse its market dominance. Same for the M&A for pharmaceutical companies.

5) Similarly the controversy of credit card banker’s acquisition got clearance from CCI due to the reasons that same does not cover under the definition of production, manufacture, distribution etc. defined in the Act.

6) Exclusive rights of a cricket game of a football tournaments to one media house was objected through the competition act in European continent and national court had found that such agreement would impact competition and consumer and thereafter intervened.

Saturday, 20 July 2013

Direct tax Code – Income from House Property

As we are expecting the DTC be implemented from 1st April 2012, we have to be familiar with the DTC provisions. In general the DTC looks and be simple but it is complicated unless otherwise if we have studied the entire provisions of the act because, things are spread out here and there and which are disconnected with relevant provisions. One must search the entire DTC to find solution. Hence it is sure that we should have consolidated view about the DTC provision before we conclude any issue with respect to this Code. Let us go through the DTC provisions for Income from house property.
Only income from letting of house property shall be taxable under this head of income as per the DTC, even if the letting in the nature of trade, commerce or business.
What is mean by “House Property”?
“house property” mean (a) any building or land appurtenant thereto; along with facilities and  services whether in-built or provided separately; or (b) any building along with any machinery, plant, furniture or any other facility or services whether inbuilt or provided separately; [Section 314(119).]
Based on the definition we can conclude that even factories are taxable under the head house property. Certain companies may have the business of letting their factory premises for rent which are now taxable under the head Income from house property and not under business income; hence they cannot claim deduction beyond 20% of rent receivable or received (Gross rent). Letting means Property that is leased or rented out or let. It is not defined in the code but in general it has this meaning.
Certain property owners are receiving lump sum amount in the name of the lease of property instead of collecting rent, and this lump sum will be repaid after the period of tenure mentioned in the agreement if any entered. How this can be considered for income from house property? On what basis and how rent shall be computed for direct tax code? Still this is remains unsolved.
When a property which is taxable under this head owned by two or more persons then if their shares are definite and ascertainable shall be computed separately for each of such person in respect of his share. When there is a dispute then it shall be computed as AOP
The following are the properties which are not taxable under the head Income from house property:
  1. To the house property, or any portion of the house property , which is used by the person as ahospital, hotel, convention centre or cold storage; and forms part of SEZ, the income from which is computed under the head “Income from Other Sources”
  1. b. To a property which is not ready for use during the financial year. What is mean by “not ready for use”? It is up to the tax payer to prove that whether the property was ready to use during the financial year or not. More over the gross rent in respect of a house property or any part of the property shall be the amount of rent received or receivable, directly or indirectly, for the financial year or part thereof, for which such property is let out. Hence if not let out we can say that it is not subject to tax. This benefit is not there in existing Income-tax Act, 1961.
How to compute taxable income under this head?
Particulars
Amount (Rs)
ARent received or receivable, directly or indirectly, for the financial year or part thereof, for which such property is let out.
XXXX
 LESS:
BThe amount of taxes levied by a local authority in respect of such property, to the extent the amount is actually paid by him during the financial year.
XX
CA sum equal to twenty per cent(20%)  of the gross rent (A)
XXX
DAny Interest on loan taken for the purposes of Acquisition, Construction, repair or renovation of the property or loan taken to repayment of first loan.
XXX
EIncome/(Loss) from House Property
XXXX
Interest on loan which pertains to the period prior to the financial year in which the house property has been acquired or constructed shall be allowed as deduction in five equal installments beginning from such financial year
The amount of rent received in advance shall be included in the gross rent of the financial year to which the rent relates. The amount of rent received in arrears shall be deemed to be the income from house property of the financial year in which such rent is received. This arrears of rent shall be included in the total income of the person under the head income from house property, whether the person is the owner of the property in that year or not. A sum equal to twenty per cent of the arrears of rent shall be allowed as deduction towards repair and maintenance of the property.
Self Occupied or Property which is/are not let out:
If any property owned by the taxpayer had not let out during the financial year then he has to claim the interest on loan take for the house under section 74 (Tax incentives) and not under income from house property. The following conditions to be fulfilled to claim the same: -
  1. Only Individual or HUF can claim under this section 74.
  1. The house property is owned by the person and not let out during the financial year
  1. The acquisition or construction of the house property is completed within a period of three years from the end of the financial year in which the loan was taken; and
  1. The person obtains a certificate from the financial institution to which the interest is paid or payable on the loan. (Only loan taken from financial institutions are eligible to be claimed under this section)
  1. The amount of deduction under this section shall not exceed Rs.1,50,000/-
Exhibit- 1:
Mr.Vimaal has the following six house properties out of which one of them are not ready for use as at 31.03.2013. The following are the details for the financial year 2012-13. The taxable income under the head Income from house property and /or deduction can be claimed shall be as follows:-
Name of the Property
Nature
Gross Rent p.a.
Interest on loan **
Taxes paid for the property
Income/(Loss) From House Property
Deduction U/s 74
Property # 1Self Occupied
Nil
Rs.2,50,000
Rs.2,500
Nil
Rs.1,50,000
Property # 2Let out
Rs.1,20,000
Rs.1,75,000
Rs.1,500
(Rs.80,500)
Nil
Property # 3Let out
Free of Rent
Rs.1,85,000
Rs.3,500
Nil
Nil
Property # 4Let out
Rs.2,40,000*
Rs.1,55,000
Rs.5,000
Rs.32,000
Nil
Property # 5Not Let out
Nil
Rs.1,86,000
Rs.2,000
Nil
Rs.1,50,000
Property # 6Not ready to use
Nil
Rs.1,98,000
Nil
Nil
Nil
Total 
 
(Rs.48,500)
Rs.3,00,000
*this tenant is not willing to pay the rent and the case is pending in court.
** From Financial Institutions.