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TMI Blog2017 (5) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... we reverse the findings of the ld. CIT(A) and hold that the interest paid to bank for acquiring capital asset would be eligible as part of cost of acquisition. - Decided in favour of assessee - ITA No. 208/Jodh/2017 - - - Dated:- 5-5-2017 - Shri Bhagchand, AM And Shri Partha Sarthi Chaudhary, JM Assessee by : Shri Rajendra Jain (Adv) Revenue by : Shri S.K. Meena (JCIT D.R.) ORDER Per: Partha Sarthi Chaudhary, J.M. This is an appeal filed by the assessee emanates from the order dated 29/03/2017 passed by the ld. CIT(A)-1, Jodhpur for the assessment year 2013-14, wherein the assessee has taken following grounds of appeal: 1. That on the facts and in the circumstances of the case, the ld CIT(A) erred in upholding the validity of order passed by the AO. 2. That on the facts and in the circumstances of the case, the ld CIT(A) erred in sustaining disallowance of ₹ 5,42,877/- on account of the cost of improvement while computing the capital gain. 3. That on the facts and in the circumstances of the case, the ld CIT(A) erred in sustaining capital gains of ₹ 5,47,465/- as computed by the ld AO. Further holding that the interest paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as purchased in the year 2008 and part portion of this plot was sold during the relevant asstt. Year. The assessee's half share in this plot. The assessee taken over loan from bank on the above property and claimed cost of index and cost of improvement on the payment of interest. So far as cost of acquisition is concerned, it is stated that the assessee invested a sum of ₹ 11,80,684/- in the year 2008 and after indexing this amount a sum of ₹ 17,28,424/- comes as cost of acquisition after indexing. This seems correct and liable to be deducted from the cost of sale of property. As regards interest paid in the year 2008-09 to 2011-12 and indexing the same (i.e. interest), the same is not admissible. As there is no improvement on the plot and no constructions is made on plot hence, the cost of improvement and indexing the same is not allowable. Furthermore, the assessee has taken over loan from the ICICI Bank for the purchase of house property which is admissible under the head income from house property, whereas the assessee is claiming the same under the head Income from Capital Gain, hence, the same is not admissible. The case laws cited by the AR of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,47,465/- 5. The assessee filed written submissions before the ld. CIT(A) at the time of hearing. The relevant portions of the written submissions are reproduced as under:- 1. That disallowances of ₹ 5,42,877/- in respect of disallowing the cost of improvement in respect of interest paid on borrowed fund for purchase of capital assets while computing the capital gain is totally erroneous as the assessee has capitalized the interest paid on the borrowing fund for purchase of such property and the benefit of indexation u/s 48 was claimed accordance with provision of the law. 2. It is undisputed fact that the expenditure in respect of interest paid to bank on account of purchase of property being related to such property and as such while computing the amount of capital gain such expenditure must be deducted as held by Hon'ble Delhi Court in the case of CIT Vs Rohtak Textile Reported in 138 1TR 195, and same was followed in following cases: a. 150 1TR 80 (MADRAS) b. 152 ITR 247 (KARN.) c. 152 1TR 482 (MADRAS) d. 107 1TR 557 (KARN.) e. 107 ITR 840 (MADRAS) f. CIT v. K. Raja Gopala Rao (2001) 252 ITR 459 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act are altogether covered by different heads of income i.e., income from 'house property and capital gains . Further, a perusal of both the provisions makes it unambiguous that none of them excludes operative of the other. In other words, a deduction under section 24(b) is claimed when concerned assessee declares income from 'house property , whereas, the cost of the same asset is taken into consideration when it is sold and capital gains are computed under section 48. We do not have even a slightest doubt that the interest in question is indeed an expenditure in acquiring the asset. Since both provisions are altogether different, the assessee in the instant case is certainly entitled to include the interest amount at the time of computing capital gains under section 48 of the Act . In view of above, the disallowance made by AO may kindly be deleted. 6. The ld. CIT(A) on consideration of the assessment order, assessee s submissions and the case laws relied upon by the assessee, has held as under:- The only dispute in the instant case is whether the interest paid by the assessee to the bank on loan availed for purchase of property could be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer and the order of the Assessing Officer was upheld. 7. Being further aggrieved, the assessee is in appeal before us. The ld AR of the assessee has reiterated the submissions as made before the ld. CIT(A) and also relied on the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Mithlesh Kumari (1973) 92 ITR 9 (Delhi). 8. On the other hand, the ld. D.R. has relied on the orders of the authorities below. 9. We have perused the case records, analysed the facts and circumstances of the case and considered the judicial pronouncements, which was placed before us. In the case of CIT Vs. Mithilesh Kumari (supra), the Hon'ble High Court has held as under:- (13) We are in respectful agreement with the observations of the Calcutta and the Bombay High Court in the decisions referred to above. In the present case, we find that the assessed in order to purchase the land had not only to borrow the amount of ₹ 95,000.00 which was the consideration for the purchase of the land but also had to pay interest of ₹ 16, 878.00 on the amount borrowed by her. The amount of ₹ 95,000.00 plus the interest paid by the assessed constitutes the actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same could not be taken into consideration for computation u/s 48 and interest amount was added to income of assessee. The CIT(A) reversed the findings of A and held deduction u/s. 24(b) and computation of capital gains u/s 48 were altogether covered by different heads of income i.e., income from house property and capital gains . None of them excludes operative of the other. The interest in question was indeed expenditure in acquiring asset. Since both provisions were altogether different, assessee was entitled to include interest paid on housing loan for computation of capital gains u/s 48 despite the fact that same had been claimed u/s 24(b) while computing income from house property. The revenue s appeal was dismissed by the ITAT, Chennai Bench and the order of the ld. CIT(A) was upheld. From these judicial pronouncements, it is very much clear that if the property is purchased from borrowed funds then consideration for the purchased amount, the interest on borrowed fund also has to be paid. The amount of interest paid by the assessee constitutes the actual cost to the assessee for that property. To exclude the interest amount from the actual cost of the assets/property ..... X X X X Extracts X X X X X X X X Extracts X X X X
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