By C. N. Vaze, Shailesh Kamdar, Jagdish T. Punjabi, Bhadresh Doshi Chartered Accountants
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Section 24, 48 – Interest on loan taken for acquisition of property can be regarded as cost of acquisition even though the same has been claimed as deduction u/s. 24 in earlier years.
Facts:
During the previous year relevant to the assessment year under consideration, the assessee returned capital gain arising on transfer of house property. While computing such capital gain, the assessee had regarded interest on loan taken in 2003 for purchasing the property as forming part of cost of acquisition of the property. In the course of assessment proceedings, the Assessing Officer (AO) noticed that the amount of interest which has been regarded as cost of acquisition had already been claimed as deduction u/s. 24(b). He was of the view that since the amount of interest was already claimed u/s. 24(b) the same could not again be allowed u/s. 48. He added the amount of interest to the income of the assessee from short term capital gains.
Aggrieved, the assessee preferred an appeal to the CIT(A) who allowed the assessee’s appeal and held that the assessee was entitled to include interest amount for computation u/s. 48 despite the fact that the same had been claimed u/s. 24(b) while computing income from house property.
Aggrieved, the revenue preferred an appeal to the Tribunal.
Held:
The Tribunal noted that admittedly the loan was taken to acquire house property and the deduction allowed u/s. 24(b) was in accordance with the statutory provisions. Upon going through the provisions of section 48 the Tribunal held that the 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’. A perusal of both the provisions makes it unambiguous that none of them excludes operation of the other. The Tribunal held that it did not have the slightest doubt that interest in question was indeed an expenditure in acquiring the asset. Since both the provisions are different, the assessee was held to be entitled to include interest amount at the time of computing capital gains u/s. 48 of the Act. CIT(A) was right in accepting the contention of the assessee and deleting the addition made by the AO.
The appeal filed by the revenue was dismissed.
