CIT(A) Holds Property Sale to Partner’s Son Genuine but Disallowed Indexed Interest Claim: ITAT sets aside Order for Verification [Read Order]
Interest on housing or acquisition loans cannot be claimed twice, once as deduction under Section 24(b) and again by adding it to the cost of acquisition under Section 48.
property - sale - Taxscan
property - sale - Taxscan
The Income Tax Appellate Tribunal ( ITAT ), Bangalore Bench, sets aside an order to the income tax department’s Assessing officer for verification of the issue of disallowance of indexed interest cost claimed by the assessee in computing capital gains.
The assessee, M/s S.I. MEDIA LLP, a partnership firm engaged in entertainment services, had sold a property during the relevant year and reported a capital loss of ₹4.84 crore. The Assessing Officer disallowed the claim, alleging the transaction was non-genuine since the property was sold to the son of one of the partners.
On its first appeal, the CIT(A) held that the sale transaction was genuine and could not be disregarded merely because the buyer was related to a partner. However, the CIT(A) disallowed the assessee’s claim of ₹2.51 crore indexed interest cost, holding that since the property was shown as an investment, the interest on borrowed funds used to acquire it could not be added to the cost of acquisition for capital gains computation.
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Before the appellate tribunal, the assessee submitted that the interest cost was directly linked to the acquisition of the property and had not been claimed under any other head of income, such as “business” or “house property.”
The Department, however, contended that this aspect required verification, as double deduction could not be permitted if the same interest had already been claimed elsewhere.
The Tribunal noted its earlier decision in Shri Gobindram Chandramani v. ITO and reiterated that interest on housing or acquisition loans cannot be claimed twice, once as deduction under Section 24(b) and again by adding it to the cost of acquisition under Section 48.
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Accordingly, the bench of Soundarajan K and Waseem Ahmed set aside the matter to the Assessing Officer to verify whether the assessee had already claimed deduction for the interest under another head of income. If not, the indexed interest cost could be considered as part of the cost of acquisition while computing capital gains; otherwise, it must be disallowed.
Thus, the appeal of the assessee allowed for statistical purposes.
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