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May 2010

Capital gains : Cost of acquisition : A.Y. 2003-04 : Interest on loan taken for purchase of property : Interest to be included in the cost of acquisition for computing capital gain on sale of property.

By K. B. Bhujle | Advocate
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11 Capital gains : Cost of acquisition : A.Y. 2003-04 :
Interest on loan taken for purchase of property : Interest to be included in the
cost of acquisition for computing capital gain on sale of property.




[CIT v. Sri Hariram Hotels (P) Ltd.; 229 CTR 455
(Kar.), 188 Taxman 178 (Kar.)]

The assessee company had purchased an immovable property
out of borrowed funds. On sale of the property, for computation of capital
gain the assessee company included the interest on the borrowed funds in the
cost of acquisition of the property. The Assessing Officer held that the
interest on the borrowed funds does not form part of the cost of acquisition.
The Tribunal allowed the assessee’s claim.

On appeal by the Revenue, the Karnataka High Court followed
its decision in the case of CIT v. Maithreyi Pai, 152 ITR 247 (Kar.) and
upheld the decision of the Tribunal.

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