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2025 (1) TMI 755

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..... 3 has proposed to insert a proviso after clause (ii) of Section 48 so as to provide that cost of acquisition or the cost of improvement shall not include the amount of interest claimed under Section 24 of the Act. The amendment is proposed to take effect from Assessment Year 2024- 25 prospectively. Thus, the proposed amendment in Section 48 to prevent double taxation makes the existing position of law loud and clear. As a corollary, as per the existing position, the assessee is entitled to claim interest on borrowed capital used for acquisition of property as part of its cost of acquisition for the purposes of determination of capital gains. For this reason also, there appears to be no infirmity in the conclusion drawn by the CIT(A). Hence, we decline to interfere. Tribunal made reference to the Amendment carried out in section 48 vide Finance Bill, 2023, which is applicable from A.Y. 2024-25. In this amendment, it has been provided that from A.Y. 2024-25, the interest expenditure will not be admissible to the assessee. The above discussion in the order of ITAT, Delhi passed in [ 2023 (3) TMI 770 - ITAT DELHI] would reveal that the issue in dispute is squarely covered in favour of .....

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..... . These two expenses have been claimed by the assessee while calculating the long-term capital gain on sale of this property. The ld. Assessing Officer has disallowed both these claims to the assessee and he computed the long-term capital gain as under:- Computation of Long Term Capital Gain Particulars Amount (Rs.) Amount (Rs.) Sale Consideration (12241 sq.ft.) 16,39,39,402/- Less: Indexed Cost of acquisition 6,02,30,791/- Less: Indexed cost of improvement 30,81,426/- Less: Brokerage @ 1% 16,39,394/- Less: legal charges 97,239/- Less: Miscellaneous 2,715/- 6,50,51,565/- Add: Unexplained adjustment of interest (refer para 2 above) 2,12,857/- Long Term Capital Gains 9,91,00,694/- 5. Dissatisfied with this working, the assessee carried the matter in appeal before the ld. CIT(Appeals). The ld. CIT(Appeals) has accepted the contention of the assessee with regard to admissibility of expenditure incurred for furniture and fixtures. The finding of the ld. CIT(Appeals) on this aspect is available on page no. 11 of the impugned order. Therefore, to that extent, there is no dispute in the present appeal. 6. The sole dispute is whether interest expenditure i .....

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..... with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto:" After perusing the above said provisions, we are of the opinion that deduction under section 24(b) and computation of capital gains under section 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 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". Therefore, the CIT(A) has rightly accepted the assessee's contention and deleted th .....

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..... ombay 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 Rs. 95,000.00 which was the consideration for the purchase of the land but also had to pay interest of Rs. 16, 878.00 on the amount borrowed by her. The amount of Rs. 95,000.00 plus the interest paid by the assessed constitutes the actual cost to the assessed of the land. The fact that the amount of Rs. 95,000.00 was paid by the assessed to the vendor and the amount of interest of Rs. 16,878.00 was paid to a different person, namely her mother-in-law, does not make any difference so far as the assessed is concerned in respect of the actual cost of the land to her It will not also make any difference whether the interest was paid on the date of the purchase or whether it is paid subsequently. To exclude the interest amount from the actual cost of the assets would lead to anomalous results. Supposing she had purchased the land for Rs. 1,00,000.00 by raising a loan of that amount and had paid interest of Rs. 20,000.00 on the said loan and had sold the land for Rs. 1,20,000.00. It would be unreasonable to hold under such .....

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..... T(A) was upheld. 3.7. 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 would lead to anomalous result. The interest amount should be definitely added to the actual cost of the property. Respectfully following these legal propositions and on basis of observations as held herein the addition on this account is deleted. 4. Ground No. 3, 4 & 5 are directed against disallowance of basic cost as Rs. 2,79,96,771/- and has taken the basic cost as 2,75,00,000/- and disallowance of interest paid to the builder on the late payment. The assessee had claimed interest of Rs. 4.56.744/- whereas the AO had allowed interest of Rs. 3,95,321/-. 4.1. On this ground, the AR of the appellant submitted as under: "The Ld. AO had reduced the cost of the acquisition from Rs. 2,79,96,770/- to Rs. 2,75,00,000/-even though the confirmation of builder dated Febru .....

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..... e rival submissions on the various points in issue. 7.1 At the outset, we observe that the CIT(A) has reversed the disallowance of Rs. 1,82,53,834/- on account of interest on borrowed funds and held that such interest cost will form part of the cost of acquisition placing reliance upon the judgment rendered by the Hon'ble Jurisdictional High Court in CIT vs. Mithlesh Kumari (1937) 92 ITR 9 (Del) and other judgments as noted in earlier paragraphs. 7.2 We find that the reasons cited by the CIT(A) are sound and is in consonance with the judgment rendered by the Hon'ble High Courts as well as the Co-ordinate Bench of Tribunal. We thus see no reason to interfere. 7.3 Significantly, the Finance Bill, 2023 has proposed certain amendment in this regard. On a reading of the Finance Bill, it appears that as per the existing position of law, some assessee claims deduction towards interest paid on borrowed capital utilized for acquisition of the property under Section 24(b) of the Act. The same amount of interest is also being claimed under Section 48 of the Act as part of cost of acquisition. In order to prevent double deduction, the Finance Bill, 2023 has proposed to insert a proviso afte .....

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