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TMI Blog2019 (4) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred, deploying the sale proceeds for any other purpose. In a given case, the asset may be sold on credit, so that interest cost continues to be incurred. The same, in short, it needs to be appreciated, is a holding cost, i.e., cost of holding the asset, post acquisition, allowable as a revenue expenditure where the asset is to be used for the purpose of business. As explained in CIT v. Tata Iron and Steel Co. Ltd. [1997 (12) TMI 5 - SUPREME COURT] reference to which was also made during hearing, there is a fundamental difference between the cost of an asset and the means of its’ financing. The manner or mode of repayment of the loan obtained to acquire an asset has, therefore, nothing to do with the cost of the asset acquired for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Addl.) v. K.S. Gupta [1979] 119 ITR 372 (AP). The ld. Departmental Representative (DR), Sh. Charan Dass, would rely on CIT v. Vardhman Polytex Ltd. [2008] 300 ITR 186 (P H), rendered following CIT v. Vardhman Polytex Ltd . [2008] 299 ITR 152 (P H)(FB). 4. I have heard the parties, and perused the material on record. 4.1 Section 48, which provides the manner of computation of capital gains chargeable u/s. 45 of the Act, reads as under in its relevant part: 48. Mode of computation. The income chargeable under the head Capital gains shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely:- (i) expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation, the principle involved is the same, i.e., what could, or could not, under the given facts and circumstances, be regarded as a qualifying cost to the assessee, either toward acquisition or, after acquisition, its improvement. Again, it is immaterial whether the capital asset under reference is a business asset, eligible for depreciation on its user, or a non-business (personal) asset. The decision is thus equally applicable in the context of computation of capital gains, as indeed was in K.S. Gupta (supra). The said decision by the Apex Court stands in fact followed by Hon ble Courts throughout the country, as indeed by the Hon ble jurisdictional High Court, as in CIT v. Vardhman Polytex Ltd . [2006] 205 CTR 457 (P H); CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or ground rent of the land the capital asset under reference, as valid. The interest cost on capital borrowed for purchase thereof, for the period after its acquisition, and up to the date of its sale, was, however, allowed. How could, one wonders, the same be regarded as a cost of acquisition which gets crystallized on the date of acquisition, or for effecting any improvement, while none has been in the instant case, to be allowed as deduction? The same can only be regarded as a cost incurred in retaining or holding the asset, as for example, the ground rent, disallowed by the Hon ble Court itself, even as it allows the claim of the interest incurred for the period following the acquisition. There is, in principle, no difference betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch as the same is incurred for bringing the asset into existence, as approved in Challapalli Sugars (supra), a decision followed in CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 (SC) and Collector of Central Excise v. Dai Ichi ,Karkaria Ltd. [1999] 156 CTR 172 (SC), upholding the principle of commercial accounting, which in fact stands since formalized per accounting standard, stating likewise (refer AS 10 by ICAI). How would then, a cost, which has nothing to do with the acquisition cost of the asset and, besides, relates to the period after its acquisition, be regarded as a part of the acquisition cost? How, one may ask, could the acquisition cost vary with the period for which the capital asset is held, as the interest cost would? A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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