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TMI Blog2024 (11) TMI 1303X X X X Extracts X X X X X X X X Extracts X X X X ..... serted in clause II vide Finance Act, 2023 and w.e.f. 01.04.2024, whereby it is provided that the cost of acquisition of the asset or the cost of improvement thereto shall not include the deductions claimed on the account of interest under clause (b) of section 24 or under the provisions of chapter VIA. And therefore for the period prior to that provision inserted and made applicable from 01.04.2024, no such restriction can be imposed and/or made applicable. This particular amendment has been taken care of by the Ld. Commissioner, who by determining that the said amendment not being clarificatory in nature and therefore cannot be applied retrospectively. The Ld. Commissioner at last by considering the explicit provisions of section 24(b) of the Act as existed and applicable as on 31.03.2013, applied the same to the instant case and by following the decisions of the jurisdictional Tribunal favoring the Assessee and the dictum laid down in the case of CIT vs. Vegetable Products Ltd. [ 1973 (1) TMI 1 - SUPREME COURT ] wherein it was held that if two reasonable constructions of a taxing provision are possible, then the construction which favors the taxpayers must be adopted ultimately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dexation is to be allowed to the interest cost? 5. The AO perused the provisions of section 55 of the Act and also reproduced in para 4.2 of the assessment order and after analyzing the provisions observed that the section 55 of the Act clearly says that the case of improvement means all the expenditure of a capital nature incurred in making any additions or alternations to the capital asset by the Assessee after it became his property . The interest payment on housing loan cannot be said to be the expenditure of a capital nature incurred in making any additions or alterations to the capital asset by the Assessee after it became his property. 5.1 The AO further observed that it is clearly evident from reading of section 55 of the Act that in no situation does the definition of cost of the acquisition involve bringing in any cost incurred after the date of acquisition, unless the cost of improvement and in the instant case, there is no improvement done in the property. 5.2 The AO further relied on the judgments passed by the Hon ble Tribunal at Mumbai in the case of V. Mahesh, Income Tax Officer vs. Vikram Sadanand Hoskote (2007) 18 SOT 130 (Mum) wherein it was held that it cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly, the AO issued the statutory notices u/s. 143(2) and 142(1) of the Act to the assessee, calling for various details and documentary evidence. In response thereto, the assessee submitted the certain details and documentary evidences before the AO. After having considered the submissions made by the assessee, the AO framed the impugned assessment order u/s. 143(3) of the Act dated 30.03.2016, determining the total income of the assessee at Rs. 17,44,37,570/-. While doing so, the AO made a disallowance of Rs. 3,95,42,739/- against the claim of indexed cost of interest as deduction while computing the capital gains. Aggrieved with the decision of AO, the assessee filed the present appeal. 15.0 During the appeal proceedings, it is noticed that the assessee 15.0 had claimed the deduction of Rs. 1,50,000/- each under the income from house property under section 24(b) of the Act i.e., interest on borrowed capital in the ITRs of AY 2011-12 and 2012-13. The fact is not recorded in the assessment order. From this, it can be stated that the assessee claimed deduction of the same interest expenditure under the head Income from House Property in the earlier years and as cost of acquisition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espite the fact that the same had been claimed and allowed u/s on 24(b). The Revenue pleaded before the ITAT that, once the assessee had availed of a deduction under section 24(6) for interest, he is not entitled to claim again a deduction of the same amount for the purposes of computation of Capital Gains u/s 48. The Hon'ble ITAT observed that there was no dispute about the fact that the interest in question was claimed and allowed as a deduction in the past in computing the income from house ante property under the statutory provisions of section 24(b). It further noted that the assessee had chosen to claim the said interest again as a deduction in computing the Capital Gains. The Tribunal, on consideration of the facts and the law, held as under: - 8. We are of the opinion that deduction u/s. 24(b) and computation of capital gains u/s. 48 of the 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 operation of the other. In other words, a deduction u/s. 24(b) is claimed when concerned assessee declares income from 'house prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal considered the facts and circumstances of the case along with the judgments and written submission and noted that the Court in the case of Sri Hariram Hotels (supra) had followed its earlier decision in the case of Maithreyi Pai(supra) to hold in Hariram Hotels case (supra), that an interest paid on borrowings for the acquisition of capital asset must fall for deduction under section 48 only if the same was not allowable as deduction under section 57 of the Act and that no assessee under the scheme of the Act could be allowed a deduction of the same amount twice over. Further, the Tribunal after analyzing the facts of Captain B. L. Lingaraju's case (supra), noted that the assessee had claimed a deduction of interest of Rs. 1,50,000 in computing the income from self-occupied house property as per section 24(b) of the Act under Income from House property. Relying on the decision of the jurisdictional Karnataka High Court in the case of Maithreyi Pai (supra), the Tribunal held that no deduction under section 48 could be allowed for the same interest in computing the Capital Gains, where it was allowed as deduction or was allowable as a deduction. Finally, the appeal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013-14 is allowed. 7. The Revenue Department, being aggrieved, is in appeal before us and raised the sole ground of appeal which read as under: Whether on the facts and circumstances of the case in law the Ld. CIT(A) is correct in allowing the indexed cost of interest paid in the Bank of Rs. 3,95,42,739/- for calculating the Long-Term Capital Gains on sale of the property by not considering the fact that the said interest amount was also claimed under section 24(b) of the I.T. Act, 1961 in the relevant years where in it was paid of. 8. We have heard the parties and perused the material available on record and the judgments cited by the parties. From the sole ground, it appears that the Revenue Department has claimed that the Ld. Commissioner erred in allowing the indexed cost of interest paid in the bank to the tune of Rs. 3,95,42,739/- for calculating the LTCG on a sale of property, by not considering the fact that the said interest amount was also claimed u/s 24(b) of the Act, in the relevant years, wherein it was paid off. 8.1 The Ld. D.R. emphasized on the ground raised in appeal, whereas Ld. Senior Advocate Shri Porus Kaka, the Ld. A.R. of the Assessee drew our attention to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost of acquisition of the asset or the cost of improvement thereto shall not include the deductions claimed on the account of interest under clause (b) of section 24 or under the provisions of chapter VIA. And therefore for the period prior to that provision inserted and made applicable from 01.04.2024, no such restriction can be imposed and/or made applicable. 8.6 We observe that this particular amendment has been taken care of by the Ld. Commissioner, who by determining that the said amendment not being clarificatory in nature and therefore cannot be applied retrospectively. The Ld. Commissioner at last by considering the explicit provisions of section 24(b) of the Act as existed and applicable as on 31.03.2013, applied the same to the instant case and by following the decisions of the jurisdictional Tribunal favoring the Assessee and the dictum laid down by the Hon ble Apex Court in the case of CIT vs. Vegetable Products Ltd. 88 ITR 192 (SC) wherein it was held that if two reasonable constructions of a taxing provision are possible, then the construction which favors the taxpayers must be adopted ultimately allowed the claim of the Assessee. 8.7 Admittedly, prior to inserti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 10(2)(vi)(b) of the Act. The reasoning of the High Court was that costs which were essentially necessary for a particular Assessee to incur for acquiring a capital asset should be included in this actual cost. In so holding, the Calcutta High Court followed a decision of the Bombay High Court in Habib Hussein v. Commissioner of Income-tax [1963] 48 ITR 859 875 (Bom.) in which it was held as follows: The dictionary meaning of the word 'cost' is 'what is laid out or suffered to obtain anything'.... In our opinion, therefore, the meaning of the expression 'actual cost to the assessee' as used in sub-section (5) of section 10 of the Act would be what the assessee has, in fact, expended or laid out for the purpose of acquiring the depreciable assets. We are in respectful agreement with the observations of the Calcutta and the Bombay High Courts in the decisions referred to above. In the present case, we find that the assessee in order to purchase the land had not only to borrow the amount of Rs. 95,000 which was the consideration for the purchase of the land, but also had to pay interest of Rs. 16,878 on the amount borrowed by her. The amount of Rs. 95,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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