In ACIT v. Mrs. Sheela Chopra, the Kolkata bench of the ITAT ruled that the amount of interest paid on loan taken for purchasing the property is an expenditure under section 48 of the Income Tax Act.
While dismissing the appeal of the Revenue, the bench held that the said amount can be classified as “cost of acquisition” under the section and therefore, are liable to be excluded while computing capital gain.
The first appellate authority granted relief to the assessee byallowinginterest of Rs. 5,15,010/- pertaining to earlier financial years as part of the cost of acquisition under the head capital gain. The Revenue challenged the order in appeal before the ITAT.
Concurring with the findings of the first appellate authority, the bench noted that there is no dispute that the assessee had availed the loan for purchasing the property in question. After the property was sold, the assessee also chose to include the interest amount while computing capital gains under section 48 of the Act.
Sec. 48 of the Act reads as:
“48. The income chargeable under the head “Capital gains” shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :—
(i) expenditure incurred wholly and exclusively in connection with such transfer;
(ii) the cost of acquisition of the asset and the cost of any improvement thereto:”
After analyzing the above provision, the bench found that the interest in question is indeed an expenditure in acquiring the asset and therefore, the assessee is entitled to include the interest amount at the time of computing capital gains u/s 48 of the Income Tax Act.
Read the full text of the order below.