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Income Tax Appellate Tribunal, MUMBAI “SMC” BENCH, MUMBAI
Before: SHRI SHAILENDRA KUMAR YADAV, JUDICIAL
PER SHAILENDRA KUMAR YADAV, J.M: This appeal has been filed by assessee against the order of Commissioner of Income-Tax (Appeals)-28, Mumbai, dated 10.10.2014 for A.Y. 2010-11 on following ground:
A.Y. 10-11 [Vimala A. Puthran vs. ITO] Page 2
“1. The Ld. CIT(A) has erred in confirming the action of A.O. of denying the claim of indexed value of capitalized amount of interest on housing loan to the tune of Rs.3,31,088/- in the computation of capital gains. The said claim may please be allowed.”
Issue before me is regarding denial of claim of indexed value of capitalized amount of interest on housing loan to the tune of Rs.3,31,088/- in computation of capital gains. The deduction of indexed value of capitalized amount of interest on housing loan for 5 years to the tune of Rs.3,31,088/- in computation of capital gains. Assessee has not claimed deduction u/s.24(b) of the Act in any of the years. Assessee was denied deduction on account of indexed value of capitalized amount of interest as cost of acquisition u/s.48 of the Act. The stand of assessee has been that year-wise break-up of interest on housing loan from ICICI Bank is as follows:
For FY 2005-06 Rs. 21,532 For FY 2006-07 Rs. 1,07,833 For FY 2007-08 Rs. 88,810 For FY 2008-09 Rs. 73,305 For FY 2009-10 Rs. 39,608 ---------------- Total Rs. 3,31,088 ---------------- 2.1 The deduction was denied by CIT(A) on two issues: i. According to him, there is no such provision in the Act to allow it. A.Y. 10-11 [Vimala A. Puthran vs. ITO] Page 3 ii. Secondly, interest on housing loan is specifically allowable as deduction only u/s.24(b) of the Act, hence cannot be capitalized u/s.48 of the Act as cot of acquisition. The claim of indexed value of capitalized interest on loan was requested to allow on the following grounds: “a. Interest on housing loan is wholly and exclusively incurred for the purchase of the house property and thus, forms part of cost of acquisition. b. Equated Monthly Installment (EMI) is a capital expenditure towards repayment of loan. c. Housing loan is nothing but the borrowed money for the acquisition of House property. d. The money borrowed has direct nexus with acquisition of the house property and hence interest on the same has been capitalized. e. The appellant has not claimed any interest u/s.24(b).”
2.2 I find that Hon’ble Delhi High Court in case of Commissioner of Income-tax vs. Mithlesh Kumari [1973] 92 ITR 9 (Delhi), wherein assessee purchased perpetual leasehold rights in an open plot of land. She had raised a loan from her mother-in-law for paying the price of land. Assessee paid certain amount to her mother-in-law by way of interest on amount borrowed and also paid ground rent in respect of land. Ultimately, she sold away the land to her mother-in-law and after including the amount paid towards interest on loan and ground rent in actual cost, disclosed remaining amount as capital gain on sale of land. The ITO A.Y. 10-11 [Vimala A. Puthran vs. ITO] Page 4 held that amount paid towards interest and ground rent could not be added to the cost of land. In second appeal, Tribunal allowed the claim of assessee. On reference, Hon’ble High Court held that Tribunal was right in adding the interest amount towards the actual cost of land. Nothing contrary was brought to my knowledge on behalf of Revenue. Facts being similar, so, following same reasoning, I am not inclined to concur with the finding of CIT(A) and Assessing Officer is directed to add interest amount towards actual cost of land. Assessing Officer is directed accordingly.
In the result, the appeal filed by assessee is allowed.
Pronounced in the open Court on this the 12th day of August, 2016.