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TMI Blog2022 (8) TMI 1133X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - CIT(A) has rightly accepted the assessee s contention and deleted the addition made by the Assessing officer - Decided against revenue. Deduction u/s 54 on account of acquisition of new residential unit - HELD THAT:- It is not in dispute that the assessee has purchased agricultural land and constructed in the said land residential house, guest house, staff quarters, swimming pool shed for parking etc. The Ld. CIT(A) has observed and rightly so that the assessee has made investment in the residential house and land appurtenant thereto and that the Act does not limit the size of appurtenant land. As decided in Shri Narendra Mohan Uniyali [ 2009 (8) TMI 825 - ITAT, DELHI] . It is crystal clear from the plain reading of Section 54 54F that exemption is allowable in respect of amount invested in the construction of a residential house. There is no any rider u/s 54F that no deduction would be allowed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gain of Rs. 1,94,89,939/- the assesee has claimed deduction of interest cost of Rs. 1,00,91,252/- as indexed cost of acquisition. On query, the assessee submitted that interest incurred for acquisition of capital asset forms part of cost of asset and relied on the following decisions: 1. CIT vs. Sri Hari Ram Hotels Pvt. Ltd. 188 Taxman 178 (Kar) 2. CIT vs. Shri Raja Gopala Rao 252 ITR 459 (Mad) 3. CIT vs. Mithilesh Kumari (1973) 92 ITR 9 (Delhi) 4. The submission of the assessee was not acceptable to the Ld. AO who observed that the decisions (supra) are not applicable to the case of the assessee. These decisions (supra) say that actual cost would include all expenditure necessary to bring the assets into existence and put them in working condition. Nowhere it has been held therein that expenditure incurred after the acquisition of the asset would be included in the cost of assets. He therefore held that interest paid by the assessee for the period commencing from the date of acquisition of asset till the date of sale would not form part of the cost of acquisition. According to Ld. AO such interest expenditure does not fall within the ambit of section 48 and cited t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant extract of judgment In fact, we find that the question which is presently before us, arose for consideration directly before the Hon'ble Madras High Court in the case of Trishul Investments Ltd. (supra). Ostensibly, the Mumbai Bench of the Tribunal in the case of Macintosh Finance Estates Limited (supra), did not have the benefit of the Judgment of Hon'ble Madras High Court because the Judgment of Hon ble Madras High Court was rendered on 12.07.2007, whereas, the decision in the case of Macintosh Finance Estates Limited (supra), was rendered by the Tribunal on an earlier date i.e. on 27.02.2006. Therefore, the Judgment of Hon ble Madras High Court being directly on the point, we prefer to follow the same. 8.5 Assessing Officer has further observed that interest component after bringing the asset into existence cannot be taken into consideration as per Explanation 8 of Section 43 of IT Act. But Section 43 is applicable for definition of certain terms relevant to income from profits and gains of business or profession from section 28 to 41. In present Case, interest on housing loan does not pertain to Business. 8.6 It is held that if property is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gments were cited in support of the proposition that where property is purchased from borrowed funds, the interest paid therein constitute cost to the assesee. It was also submitted by the Ld. AR that Mumbai Tribunal in its later decision in DCIT vs. Shri Fritz D. Silva in ITA No. 236/Mum/2010 dated 8.5.2015 overruled its earlier decision in Macintosh Finance Estates Ltd. (supra) relied upon by the Ld. AO, following the judgment of Hon ble Madras High Court in CIT vs. Trishul Investments Ltd. (2008) 305 ITR 434 (Mad.). The Ld. AR further submitted that Explanation 8 to section 43 of the Act is not at all applicable to the facts of the assessee s case. 8.1 On careful consideration of the rival submissions and perusal of the material on records, we have come to the conclusion that this issue is squarely covered by the decision of Delhi SMC Bench of the Tribunal in Ashok Kumar Shahi vs. ACIT in ITA No. 5155/Del/2018 dated 30.10.2019 in which decision of Chennai Bench of the Tribunal in ACIT vs. Shri C. Ramabrahmam in ITA No. 943/Mds/2012 dated 31.10.2012 has been quoted wherein the Tribunal in para 8 held as under: 8. We have considered submissions of both parties at length ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing officer. Hence, qua this ground, we uphold the order of the CIT(A). Accordingly, we uphold the order of the Ld. CIT(A) and reject this ground of the Revenue. 9. Ground No. 2 relates to denial of exemption under section 54 by the Ld. AO which has been allowed by the Ld. CIT(A). The Ld. DR supported the order of the Ld. AO whereas the Ld. AR submitted that the solitary ground on which the Ld. AO disallowed the claim of the assessee is that the residential house is constructed on agricultural land. The impugned disallowance is not valid on this ground alone as ITAT Jaipur Bench has held in Shyam Sunder Makhija vs. ITO 38 ITD 125 that the Farm House is also a residential house. The Ld. AR submitted that section 54 does not put any rider that deduction in respect of investment in acquisition of land appurtenant to the building will not quality for exemption. 9.1 We have given our careful thought to the submissions of the parties and perused the orders of the Ld. AO/CIT(A) as also the material on records. It is not in dispute that the assessee has purchased agricultural land and constructed in the said land residential house, guest house, staff quarters, swimming pool ..... X X X X Extracts X X X X X X X X Extracts X X X X
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