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| DATE: | (Date of pronouncement) |
| DATE: | November 20, 2012 (Date of publication) |
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| Click here to download the judgement (Ramabrahmam_interest_house_property_capital_gains.pdf) |
Interest paid on borrowing for acquiring house deductible u/s 24(b) & 48
The assessee borrowed funds for purchasing a house. The interest paid on the said loan was claimed as a deduction u/s 24(b). When the house was sold, the interest paid on the said loan was treated as “cost of acquisition” and claimed as a deduction u/s 48 in computing the capital gains. The AO held that as the interest had been allowed as a deduction u/s 24(b), it could not allowed again in computing capital gains. The CIT(A) allowed the claim. On appeal by the department to the Tribunal, HELD dismissing the appeal:
Deduction u/s 24(b) and computation of capital gains u/s 48 are altogether covered by different heads of income i.e., income from ‘house property’ and ‘capital gains’. Neither of them excludes the other. A deduction u/s 24(b) is claimed when the assessee computes 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. There is no doubt that the interest in question is an expenditure in acquiring the asset. Since both provisions are altogether different, the assessee is entitled to include the interest at the time of computing capital gains u/s 48.
With all humility and respect to the Hon’ble ITAT, it is submitted that the Tribunal has not mentioned slightest reason as to how the interest can be added to the cost of acquisition of the capital asset. They have just stated that “they do not have slightest doubt that it is the cost of acquisition”.
The interest cost of funds used for acquiring a capital asset is never treated as cost of asset , except in case of assets acquired for business and that too for a period prior to putting that asset to business use. There are a couple of old decisions on the subject which are favourable to assessee but they were quite specific to the facts of the case.
The judgement needs reconsideration .
Looking Ahead >
The issue, in one’s firm conviction,cannot, in any view, be taken to have been conclusively settled – FOR or AGAINST !
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