TaxTMI 
TaxTMI 
2024 (2) TMI 867
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.... 4. That the Assessing officer has erred in disallowing the amount of Rs. 94,17,082/-which is interest paid on housing loan and indexed cost of the same is Rs. 1,16,43,521/-. 5. That the Assessing officer has wrongly interpreted the judgment of CIT Vs Mithilesh Kumari (1973), 92 ITR 9 (DEL). 6. The CIT(A) has erred in disallowing the same on the basis of the judgment passed in the case of Commissioner of Income-tax vs. Tata Iron & Steel Co. Ltd. 31 ITR 285 (SC), which is also in favor of the assessee. The CIT(A) has also wrongly interpreted the judgment. 7. That the additions confirmed and the observations made by CIT(A) are unjust, unlawful and based on mere surmises and conjunctures. The additions made cannot be justified by any material on record. 8. That the explanation and evidence produced, material placed and available on record has not been properly considered and judicially interpreted and the same do not justify the additions/allowances made. 9. That the impugned assessment order passed by the Assessing Officer and order passed by the CIT(A) are against principal of natural justice and the same has been passed without affording reasonable and adequate opportuni....
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....entative submitted that the interest claimed by the assessee as cost of acquisition is not allowable and relied on the order of the Tribunal of Mumbai Bench in ITA No. 1101/Mum/2022 dated 31/07/2023 and sought for dismissal of the Appeal. 7. We have heard both the parties and perused the material available on record. During the course of the assessment, it is observed by the A.O. that the assessee sold property bearing No. 1403, 14th Floor, Springs, G. D. Ambedkar Marg, Dadar, Mumbai for consideration of Rs. 7,74,00,00/- on 04/01/2013. The Long Term Capital gain arising from the property has been computed as under:- "Sale consideration 7,74,00,000/- Less sale expenses 58,79,547/- Net sale consideration receipt 7,15,20,453/- Less: indexed acquisition cost (2,4!,34,901/551*852) Indexed cost of improvement 73,19,302/- (2,08,44,290/551 *852) 2,62,66,923 6,35,86,228/- LTCG 79,34,225/- Less: exemption claimed u/s 54 Taxable LTCG arising from the property 79,34,225/- Taxable LTCG ari....
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....e is completed or the house is acquired and interest from the year of construction or acquisition of house till it is repaid, shall be allowed as deduction in respective previous years to which it belongs: However, where the house property is sold within 5 years of the year of purchase or construction and the Interest for the pre-construction period could not be claimed as deduction as it is allowed as deduction in five equal installments starting from the previous year in which construction of the house is completed or the house is acquired, the balance interest may be treated as part of cost of asset for computing capital in However, in my view, the cost of acquisition will made only the amount made with the purchase of property The Interest on the loan taken has no nexus with the property purchased and, therefore, appellant canto claim the benefit of interest for calculating the cost of acquisition: Hon'ble Supreme Court in the case of Commissioner of Income-tax vs. Tata Iron & Steel Co. Ltd 31 ITR 285 (SC) have held that cost of an asset and cost of raising money purchase of asset are two different and independent transactions and events subsequent to acquisition of assets ....
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....omputing capital gains. These are expenditure incurred wholly and exclusively in connection with the transfer and the cost of acquisition of assets along with the cost of any improvement interest on capital for purchased property does not increase the cost of acquisition of asset (MLG Enterprises Vs CIT (Karnataka) (HC) 167 ITR 11 ITO Vs Vikram Sadananda Hoskote (ITAT, Mum 1800 SOP 130) Therefore, the computation was done as per the provision of the I.T Act, 1961 8.3 The Ld DR by relying upon the judgement cited as CIT Vs Tata Iron & Steel Co. Ltd. 231 ITK 285 IS Contended that Ld. CIT(A) has wrongly ignored laid down by Hon'ble Supreme Court in the judgement (supra) by adding the amount of Rs. 1,58,209/ as orders paid to Mrs. Gunjan Batra in the cost of acquration: 8.4 The Hon ble Apex Court in the judgment (supra) held as under:- The manner of repayment of a loan cannot affect the cost of the assets acquired the assessee What is the actual cost must depend on the amount paid by the assessee to acquire the asset. The amount may have been borrowed by the assessee, but even if the assessee did not repay the loan it will not alter the cost the asset, if the borrower defaults in....
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.... could not avail the benefit of interest on loan in five installments as it was a case of purchase of land and, therefore, no benefit under the head income from house property could be availed. Therefore, the ratio of judgment is not applicable to the facts of appellant's case. Therefore, in view of the farts of the case and aforesaid judgment it is held that AO is correct in making the disallowance of Rs. 1,16,43,521/-being indexed cost of acquisition of property of Rs. 94.17,082/ on account of interest paid on borrowed capital In view of the above, appeal is dismissed. 6. in the result, appeal is dismissed." 10. It is the case of the assessee that deduction under Section 24(b) of the Act as claimed when the assessee declares income from house property whereas the indexed cost of the said asset was taken into consideration when the asset was sold and capital gains are computed u/s 48 of the Act. As per Section 48 of the Act, the cost of acquisition is the value for which the property has been acquired by the assessee and, therefore, expenses of capital nature for completing or acquiring the title of the property are includable in the cost of acquisition. Further it is also ....
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....s purchased with non repayable subsidy received from the Government, the cost of the asset will be the pace assessee for acquiring the asset. In the instant case, the allegation is that the time of repayment of loan, there was a fluctuation in the rate of foreign exchange as f which, the assessee had to repay a much lesser amount than he would have the paid. In our judgment, this is not a factor which can alter the cost incurred by the for purchase of the asset. The assessee may have raised the funds to purchase the by borrowing but what the assessee has paid for it is the price of the asset that price cannot change by any event subsequent to the acquisition of the asset be our the manner or mode of repayment of the loan has nothing to do with the cost of acquired by the assessee for the purpose of his business. We hold that the quest rightly answered by the High Court. The appeals are dismissed. There will be to costs." 13. Further, the Mumbai Bench of the Tribunal in the case of DCIT, Central Circle Vs. Narendra Gehlaut in ITA No. 1101/Mum/2022 held as under:- "6.3 We have heard rival submission of the parties and perused the relevant material on record. on housing loan whethe....
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....ssessee is right in the flat. Thus following the decision of the Hon'ble Supreme Court (supra), the interest claimed as cost of acquisition is not allowable. We are of the view that Mr. Murthy is right in his contention on this aspect of the matter. Coming to the question raised, we find it difficult low how the manner of repayment of loan can affect the cost of the assets acquired by the assessee. What is the actual cost must depend on the amount paid by the assessee to acquire the asset. The amount may have been borrowed by the assessee, but even if assessee did not repay the loan it will not alter the cost of the asset. If the borrower defaults in repayment of a part of the loan, the cost of the asset will not change. What has to be borne in mind is that the cost of an asset and the cost of raising money for purchase of the asset are two different and independent transactions. Even if an asset is purchased with non-repayable subsidy received from the Government, the cost of the asset will be the price paid by the assessee for acquiring the asset. In the instant case, the allegation is that at the time of repayment of loan, there was a fluctuation in the rate of foreign exchange ....
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....ndly, he submitted right acquired in flat not part of the cost of e submitted that said interest payment is allowable income from house property' as revenue expenditure and therefore, cannot be included as part of capital We have heard rival submission of the parties and perused the We find that the issue of interest paid on housing loan whether eligible for deduction as cost of acquisition term capital gain hasn't decided by the Tribunal Delhi bench in order dated 30/09/2015 in the case of ACIT Vs Sunil Batra in ITA No. 3644 /Del/2011 for assessment 08. The tribunal relied on the decision of the Hon'ble Supreme Court in the case of CIT Vs Tata Iron and steel Co Ltd(231 . The Hon'ble Supreme Court held that cost of the asset and cost of raising money for purchase of the asset, are two transactions. The relevant finding of the Hon'ble Supreme "We are of the view that Mr. Murthy is right in his contention on this aspect of the matter. Coming to the question raised, we find it difficult to follow how the manner of repayment of loan can affect the cost of the assets acquired by the assessee. What is the actual cost must depend on the amount paid by the assessee to acquire the asset....
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.... the Government, the cost of the asset will be the price paid by the assessee for acquiring the asset. In the instant case, the allegation is that at the time of repayment of loan, there was a fluctuation in the rate of foreign exchange as a result of which, the assessee bad to repay a much lesser amount than he would have otherwise paid. In our judgment, this is not a factor which can alter the cost incurred by the assessee for purchase of the asset. The assessee may have raised the funds to purchase the asset by borrowing but what the assessee has paid for it, is the price of the asset. That price cannot change by any event subsequent to the acquisition of the asset. In our judgment, the manner or mode of repayment of the loan has nothing to do with the cost of an asset acquired by the assessee for the purpose of his business. We hold that the questions were rightly answered by the High Court. The appeals are dismissed. There will be no order as to costs. Though in above case, the issue was impact of fluctuation of foreign currency loan borrowed for purchase of the asset, but the same analogy apply for interest for money borrowed purposes of capital asset , which in the case of t....