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Income Tax Appellate Tribunal, ‘A’ BENCH : CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
Revenue in this appeal filed against an order dated 31.08.2017 of the ld. Commissioner of Income Tax (Appeals)-12, Chennai, has taken altogether three grounds of which ground No.1 & 3 are general needing no specific adjudication.
Ground No.2 of the Revenue is reproduced hereunder:-
’2.1 The Id.CIT(A) erred in deleting the disallowance of interest on borrowed capital of Rs. 12,73,941/- for purchase of short term capital asset sold during FY 2008-09.
2.2 The Id.CIT(A) ought to have seen that as per Section 48(ii), the cost of acquisition of asset and the cost of improvement thereto alone can be reduced from the full value of consideration. There is no express provision in the Act to reduce the interest on borrowed fund for purchase of property from full value of consideration.
2.3 The Id.CIT(A) erred in holding that the cost of acquisition as per the provisions of section 48(ii) indicates cost incurred upto the date of sale of property whereas the cost acquisition as per section 55(2) of the Income Tax Act, is cost incurred upto the date of acquisition of property and not the expenditure incurred later’’.
No one appeared for the assessee despite notice issued by 3.
Registered Post.
Ld. Counsel for the Revenue submitted that interest paid on loan availed for purchasing a property was allowed as cost of acquisition while computing short term capital gains arising out of sale of such property. As per the ld. Departmental Representative, interest on housing loan cannot be considered to be a part of cost of acquisition or improvement.
We have heard the ld. Departmental Representative and 5. perused the orders of the authorities below. Assessee had calculated short term capital gains on sale of property at �8,65,172/-. While making such calculation it had included interest of �12,73,941/- incurred on the loan availed for purchasing such property as a part of cost. Ld. Assessing Officer had disallowed the claim since according to him, interest paid was not part of cost of acquisition or cost of improvement. Ld. Commissioner of Income Tax (Appeals) relying on a judgment of Hon’ble Karnataka High Court in the case of CIT vs. Hariram Hotels (P) Ltd 325 ITR 136 and CIT vs. Maithreyi Pai (2008- TMI-27586) and also a judgment of Hon’bel Jurisdictional High Court in the case of CIT vs. K. Rajagopala Rao, (2001) 252 ITR 459 held the issue in favour of the assessee. Ld. Commissioner of Income Tax (Appeals) also quoted from a decision of the Co-ordinate Bench in the case of ACIT vs. Ramabrahman. In our opinion, how the facts relating to these case laws, compared with the facts in assessee’s case was not carefully verified by the ld. Commissioner of Income Tax (Appeals).
Even the citation of the last mentioned case is not clearly mentioned by the ld. Commissioner of Income Tax (Appeals). In the circumstances, we are of the opinion that the question regarding computation of short term capital gains needs to be revisited by the Commissioner of Income Tax (Appeals). We set aside the orders of the lower authorities and remit the issue back to the file of the ld. Commissioner of Income Tax (Appeals) for consideration afresh in accordance with law.
In the result, the appeal of the Revenue is allowed for 6. statistical purpose.
Order pronounced on Thursday, the 3rd day of May, 2018, at Chennai.