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Income Tax Appellate Tribunal, ‘ D’ SMC BENCH : CHENNAI
Before: SHRI JOGINDER SINGH & SHRI A.MOHAN ALANKAMONY
आदेश / O R D E R
PER JOGINDER SINGH, VICE PRESIDENT:
This is an appeal filed by the assessee against the order of the ld. Commissioner of Income-tax (Appeals)-13, Chennai dated 22.02.2018 for the assessment year 2013-14 on the ground that the ld. First Appellate Authority erred in confirming the disallowance of `.10,86,733/- (which is 1/3rd of interest of `.32,60,199/-) paid on borrowed capital without considering the factual matrix as the interest expenses is allowable as cost of acquisition as the same were incurred wholly and exclusively in connection with transfer of the property and thus falls under the purview sec.48 of the Income Tax Act, 1961.
During hearing the ld. Counsel for the assessee Shri G.Baskar advanced argument, which is identical to the grounds raised, by placing reliance upon the decision from Hon’ble Jurisdictiional High Court in CIT Vs. K.Raja Gopal Rao ( 2001) 252 ITR 459 (Mad.). On the other hand, ld.D.R B.Sagadevan defended the addition made by the ld. Assessing Officer and confirmed by the ld.CIT(A). It was contended that the loan was not used for acquisition of the property, therefore, it needs examination.
We have considered the rival submissions and perused the material available on record. The facts in brief are that the assessee declared total income of `.11,44,160/- and filed his return of income on 15.11.2013, which was processed u/s.143(1) of the Act. Thereafter, the case of the assessee was selected for scrutiny, therefore, notices u/s.143(2) & 142(1) of the Act were served upon the assessee.
The assessee attended the assessment proceedings on various dates and furnished the details called for by the ld. Assessing Officer (as is evident from paras 1 & 2 of the assessment order). The assessee along with other two persons namely Shri S.Rajesh Kumar & Shri Mahendra Kumar purchased a property, comprising of land and building, bearing O.S No.277, ` No.148/3, at present ` No.148/13, C.C No.2243 & 2244, situated at Kilpauk for a consideration of `.6,45,00,000/- on 01.12.2010 from Dr.A.Chandrahasan Johnson, Dr. Mrs.Satyabama Johnson, Mr.Rajkumar Johnson & Mr. Ebenezer Johnson. So far as the source of purchase of the above property is concerned, the assessee furnished the details before the ld. Assessing Officer by claiming that he received `.4/- crores vide joint loan account No.48142344 dated 21.12.2010 by mortgaging the property at Standard Chartered Bank (Loan Account, Chennai Branch, and the source of the balance amount of `.3,03,05,000 was out of personal account of the partners. It was further claimed that the profit/loss yielded from the sale of the said land/building was equally shared by the co-owners and was admitted in the individual hands. The assessee was asked to produce the computation of short term capital gains from the sale of the property, which was provided. The assessee admitted short term capital gains at `.5,36,233/-. While making the computation, the assessee claimed interest expenses of `.32,60,199/- and added towards the purchase cost of the said property. However, the ld. Assessing Officer did not accept the interest payment/ the expenses on the reasons stated in the assessment order. On appeal before the ld.CIT(A), the stand taken by the ld. Assessing Officer was affirmed. The assessee is aggrieved and is in appeal before this Tribunal. Now the question arises whether the payment of interest on acquisition of the property should be allowed while computing the capital gains. The assessee also filed the paper book running into 1 to 47 pages. At this stage, the Bench asked the ld.Counsel for the assessee whether this paper book was filed before the ld.CIT(A), he fairly agreed that except the written submissions, no other document was filed before the ld. First Appellate Authority. In such a situation, we are of the view that all the documents, which were filed before the ld. Assessing Officer, should have been filed before the ld.CIT(A) in reaching to a fair conclusion. At the same time, there is no discussion/verification made by the ld. Assessing Officer during the assessment proceedings with respect to use of the loan for acquisition of the property. In such a situation, we remand this appeal to the file of ld. Assessing Officer to examine whether the loan was used for acquisition of the property and also whether the interest should be treated as cost of acquisition, considering the decision of Hon’ble Jurisdictiiona High Court in the case of K.Raja Gopal Rao (Supra). After examining the factual matrix, the ld. Assessing Officer is directed to decide a fresh in accordance with law. The assessee is also directed to furnish the necessary evidence, if any, in support of his claim for which due opportunity be provided to the assessee. Thus, the appeal of the assessee is allowed for statistical purposes only.
Finally, the appeal of the assessee is allowed for statistical purposes only.
This order was pronounced in the open court, at the conclusion of the hearing, in the presence of learned counsel from both sides on 04th December, 2018.