Smt. Parwati Devi Totalani, Jaipur V. Income Tax Officer, Ward -7(2), Jaipur

ITA 120/JPR/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3491 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 04-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Capital Gains
• Section: 50C; 43; 48; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,A JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 120/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 PARWATI DEVI TOTLANI W/O ISHWAR LAL C/O VISHAN DAS SATTAN MAL, A/28, TERMINAL MARKET, MUHANA, JAIPUR. CUKE VS. THE ITO, WARD-7(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAGPT 4045 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI PRAVEEN SARASWAT (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : MISS CHANCHAL MEENA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 27/02/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT :28/02/2020 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)-III, JAIPUR DATED 28.12.2018 FOR THE ASSESSM ENT YEARS 2010-11 WHEREIN THE LIMITED ISSUE FOR CONSIDERATION IS NON -GRANT OF DEDUCTION OF INTEREST EXPENDITURE AS PART OF COST OF CONSTRUCTIO N WHILE COMPUTING CAPITAL GAINS U/S 48 OF THE IT ACT. ITA NO. 120/JP/2019 M/S PARWATI DEVI TOTLANI VS. ITO 2 2. DURING THE COURSE OF HEARING, THE LD. AR SUBMITT ED THAT THE ASSESSEE WAS ALLOTTED A FLAT NO. T-1/147 IN SECTOR- 6, VIDHYADHAR NAGAR, JAIPUR HAVING THE MEASUREMENT OF 938.37 SFT BY RAJASTHAN RAJYA SEHAKARI AWASAN SANGH LTD., JAIPUR ON 12/01/1 995 AT A TOTAL COST OF RS. 4,85,941/-. 3. IT WAS SUBMITTED THAT THE ASSESSEE TOOK LOAN OF RS. 2,80,000/- ON 01/07/1995 AND PAID THE BALANCE AMOUNT FROM HER OWN SOURCES. THE ASSESSEE INCURRED INTEREST EXPENSE OF RS. 3,93, 898/- DURING THE LOAN TENURE SINCE 01/07/1995 TO 31/03/2009 AND THIS INTEREST WAS CAPITALIZED. NO DEDUCTION U/S 24 (B) WAS CLAIMED IN THE ITRS FILED FOR THE VARIOUS YEARS. THE ASSESSEE IS SUBMITTING THE C OPIES OF ITRS FILED DURING THIS PERIOD WITH THIS PAPER BOOK TO PROVE TH AT NO INTEREST WAS CLAIMED U/S 24(B). 4. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD SOLD FLAT ON 29/07/2009 FOR RS. 14,51,000/- (VALUE UNDER 50C RS. 14,73,240/-) AND LONG TERM CAPITAL GAINS ON THIS SALE WAS COMPUTED A S UNDER:- S. NO. NATURE OF COST COST INCURRED YEAR OF PURCHASE INEDEXED COST A) COST OF FLAT ALLOTTED 4,85,941/- 1994-95 11,85,771/- B) INTEREST PAID ON LOAN TO LIC HOUSING 3,93,898/- PAID IN DIFFERENT YEARS 3,93,898/- C) PAINT, ELECTRICITY EXPENSES AND PENALTY 16,998/- -DO- 16,998/- ITA NO. 120/JP/2019 M/S PARWATI DEVI TOTLANI VS. ITO 3 A TOTAL (A+B+C) 15,96,667/- B SALE VALUE UNDER 50C 14,73,240/- LONG TERM CAPITAL GAIN (LOSS) B-A 1,22,427/- ITR WAS FILED BY THE ASSESSEE CLAIMING LOSS OF RS. 7,15,181/- AFTER APPLYING INDEXATION ON PURCHASES COST + INTER EST + EXPENSES. 5. IT WAS FURTHER SUBMITTED THAT THE NOTICE U/S 148 OF THE ACT WAS ISSUED ON 31/03/2017. THE AO REJECTED THE CLAIM OF INTEREST AND OTHER EXPENSES HOLDING IN THE ASSESSMENT ORDER DATED 16/11/2017 AS UNDER : BUT AS PER THE IT ACT, 1961 ALL THE PAYMENTS M ADE TOWARDS REPAYMENT OF LOAN TAKEN AND PENALTY, ELECTRICITY EX PENSES ETC. IS NOT AN ALLOWABLE EXPENSES AND SHOULD NOT BE CLAIMED IN PUR CHASE COST. 6. IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) UP HELD THE VIEW OF THE AO BY HOLDING THAT I CAREFULLY CONSIDER THE ISSUE ALSO BUT I FIND TH AT THE EXPENSES OF RS. 3,93,898/ - AND RS. 16,998/- AR E NOT RELATED TO THE COST OF CONSTRUCTION OF ASSET'. 7. IT WAS FURTHER SUBMITTED THAT BOTH OF THE GROUND S OF APPEAL RELATE TO CORE ISSUE I.E. WHETHER THE INTEREST AND OTHER E XPENSES CAN FORM PART OF THE COST OF THE CAPITAL ASSET FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS. 8. IN THIS REGARD, IT WAS SUBMITTED THAT THE ASSESS EE HAS NOT CLAIMED THE DEDUCTION OF INTEREST U/S 24(B) AND CLA IMED THE SAME AS COST OF CAPITAL ASSET U/S 48 ONLY. THEREFORE, APPEL LANT IS NOT CLAIMING 'DOUBLE DEDUCTION' OF THE SAME AMOUNT WHICH HAS BEE N CRITICIZED ITA NO. 120/JP/2019 M/S PARWATI DEVI TOTLANI VS. ITO 4 STRONGLY BY THE HON'BLE HIGH COURT IN THE CASE OF E SCORTS LTD & ANOTHER VS UNION OF INDIA (1993) 199 ITR 43 (SC). 9. IT WAS FURTHER SUBMITTED THAT IT IS ALMOST A SET TLED LAW, BEING UPHELD BY THE SEVERAL CO-ORDINATE BENCHES, THAT INT EREST FORMS PART OF THE COST OF CAPITAL ASSETS, IN FOLLOWING CASES: ITA NO. ITAT BENCH NAME OF CASE GIST 943/2012 AY 2007-08 C BENCH, CHENNAI ACIT VS. SHRI C. RAMABRAHAMAM ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S 24(B) AND U/S 48 AS BOTH PROVISIONS ARE ALTOGETHER DIFFERENT. 147/2015 AY 2011-12 G BENCH, NEW DELHI SUBHASH BANA VS. ACIT, NEW DELHI ENTIRE INTEREST PAID TO BANK FOR ACQUIRING CAPITAL ASSET WOULD BE ELIGIBLE AS PART OF COST OF ACQUISITION. 208/2017 AY 2013-14 JODHPUR GAYATRI MAHESHWARI VS. ITO, WARD 1(2), JODHPUR THE AMOUNT OF INTEREST PAID BY THE ASSESSEE CONSTITUTES THE ACTUAL COST TO THE ASSESSEE FOR THAT PROPERTY. THE INTEREST AMOUNT SHOULD BE DEFINITELY ADDED TO THE ACTUAL COST OF THE PROPERTY. 1120/2016 AY 2011-12 C BENCH, CHENNAI ITO VS. SMT. R. AISHWARYA C ORDINATE BENCH HAS CLEARLY HELD THAT AN ASSESSEE IS ENTITLED TO INCLUDE INTEREST IN THE CAPITAL COST WHILE COMPUTING CAPITAL GAINS U/S 48 OF THE ACT. JUDICIAL DISCIPLINE REQUIRES US TO FOLLOW THE ORDER OF A CO- ORDINATE BENCH. ITA NO. 120/JP/2019 M/S PARWATI DEVI TOTLANI VS. ITO 5 IT WAS ACCORDINGLY SUBMITTED THAT THE ASSESSEES AP PEAL DESERVES TO BE ALLOWED. 10. PER CONTRA, THE LD. DR IS HEARD WHO HAS TAKEN T HROUGH ITS FINDINGS OF THE LOWER AUTHORITIES AND HAS THUS RELIED ON THE SAID FINDINGS. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE COORDINATE BENCH IN CASE O F GAYATRI MAHESHWARI VS. ITO (SUPRA) HAS CONSIDERED THE DECI SION OF HONBLE DELHI HIGH COURT IN CASE OF CIT VS. MITHILESH KUMAR I (1973) 92 ITR 9 AND ALSO THE DECISION OF HONBLE KARNATAKA HIGH COU RT IN CASE OF CIT VS. SHRI HARIRAM HOTELS (PURCHASE) LTD. (2010) 188 TAXM AN 170 (KAR) AND HAS HELD AS UNDER:- 9. WE HAVE PERUSED THE CASE RECORDS, ANALYSED THE FACTS AND CIRCUMSTANCES OF THE CASE AND CONSIDERED THE JUDICI AL PRONOUNCEMENTS, WHICH WAS PLACED BEFORE US. IN THE CASE OF CIT VS. MITHILESH KUMARI (SUPRA), THE HON'BLE HIGH COUR T HAS HELD AS UNDER:- '(13) WE ARE IN RESPECTFUL AGREEMENT WITH THE OBSER VATIONS OF THE CALCUTTA AND THE BOMBAY HIGH COURT IN THE DECISIONS REFERRED TO ABOVE. IN THE PRESENT CASE, WE FIND THAT THE ASSESS ED IN ORDER TO PURCHASE THE LAND HAD NOT ONLY TO BORROW THE AMOUNT OF RS. 95,000.00 WHICH WAS THE CONSIDERATION FOR THE PURCH ASE OF THE LAND BUT ALSO HAD TO PAY INTEREST OF RS. 16, 878.00 ON THE AMOUNT BORROWED BY HER. THE AMOUNT OF RS. 95,000.00 PLUS T HE INTEREST PAID BY THE ASSESSED CONSTITUTES THE ACTUAL COST TO THE ASSESSED ITA NO. 120/JP/2019 M/S PARWATI DEVI TOTLANI VS. ITO 6 OF THE LAND. THE FACT THAT THE AMOUNT OF RS. 95,000 .00 WAS PAID BY THE ASSESSED TO THE VENDOR AND THE AMOUNT OF INT EREST OF RS. 16,878.00 WAS PAID TO A DIFFERENT PERSON, NAMELY, H ER MOTHER-IN- LAW, DOES NOT MAKE ANY DIFFERENCE SO FAR AS THE ASS ESSED IS CONCERNED IN RESPECT OF THE ACTUAL COST OF THE LAND TO HER. IT WILL NOT ALSO MAKE ANY DIFFERENCE WHETHER THE INTEREST W AS PAID ON THE DATE OF THE PURCHASE OR WHETHER IT IS PAID SUBS EQUENTLY. TO EXCLUDE THE INTEREST AMOUNT FROM THE ACTUAL COST OF THE ASSETS WOULD LEAD TO ANOMALOUS RESULTS. SUPPOSING SHE HAD PURCHASED THE LAND FOR RS. 1,00,000.00 BY RAISING A LOAN OF T HAT AMOUNT AND HAD PAID INTEREST OF RS. 20,000.00 ON THE SAID LOAN AND HAD SOLD THE LAND FOR RS. 1,20,000.00. IT WOULD BE UNREASONA BLE TO HOLD UNDER SUCH CIRCUMSTANCES BY EXCLUDING THE INTEREST AMOUNT FROM THE ACTUAL COST OF THE LAND THAT SHE HAD MADE A CAP ITAL GAIN OF RS. 20,000.00 WHEN, AS A MATTER OF FACT, SHE HAD NOT MA DE ANY PROFIT AT ALL BY THE TRANSACTION. APPLYING THE SAID OBSERV ATIONS OF THE CALCUTTA AND THE BOMBAY HIGH COURTS TO THE PRESENT CASE, WE HOLD THAT THE TRIBUNAL WAS RIGHT IN ADDITING THE IN TEREST AMOUNT OF RS. 16,878.00 TOWARDS THE ACTUAL COST OF THE LAND.' IN THE CASE OF CIT VS. SRI HARIRAM HOTELS (PURCHASE ) LTD. (2010) 188 TAXMAN 170 (KAR), THE HON'BLE KARNATAKA HIGH CO URT HAS HELD AS UNDER:- '7. WE ARE UNABLE TO AGREE WITH THE ARGUMENTS ADVAN CED BY THE LEARNED COUNSEL FOR THE REVENUE FOR THE SIMPLE REAS ON ON FACTS THAT EVEN THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS HELD THAT INTEREST HAD ACCRUED AS ON 31/3/2003 AND THERE FORE, THE ITA NO. 120/JP/2019 M/S PARWATI DEVI TOTLANI VS. ITO 7 TRIBUNAL IS JUSTIFIED IN GRANTING THE RELIEF TO THE ASSESSEE SINCE THE PROPERTY HAS BEEN PURCHASED OUT OF THE LOAN BORROWE D FROM THE DIRECTORS AND ANY INTEREST PAID THEREON IS TO BE IN CLUDED WHILE CALCULATING THE COST OF ACQUISITION OF THE ASSET. T HEREFORE, QUESTION NO. 1 HAS TO BE ANSWERED AGAINST THE REVEN UE.' IN THE CASE OF ACIT VS C.RAMABRAHMAM, THE ITAT CHEN NAI BENCH 'C' IN ITA NO. 943/MDS/2012 HAS HELD THAT THE ASSESSEE HAD PURCHASED HOUSE PROPERTY, AVAILING LOAN. THE HO USE PROPERTY WAS SUBSEQUENTLY SOLD AND ASSESSEE INCLUDED INTERES T PAID ON HOUSING LOAN WHILE COMPUTING CAPITAL GAINS U/S 48. THE ASSESSING OFFICER WAS OF OPINION THAT SINCE INT EREST IN QUESTION ON HOUSING LOAN, HAD ALREADY BEEN CLAIMED AS DEDUCTION U/S 24(B), THE SAME COULD NOT BE TAKEN INTO CONSIDE RATION FOR COMPUTATION U/S 48 AND INTEREST AMOUNT WAS ADDED TO INCOME OF ASSESSEE. THE CIT(A) REVERSED THE FINDINGS OF A AND HELD DEDUCTION U/S. 24(B) AND COMPUTATION OF CAPITAL GAI NS U/S 48 WERE ALTOGETHER COVERED BY DIFFERENT HEADS OF INCOM E I.E., INCOME FROM 'HOUSE PROPERTY' AND 'CAPITAL GAINS'. NONE OF THEM EXCLUDES OPERATIVE OF THE OTHER. THE INTEREST IN QUESTION WA S INDEED EXPENDITURE IN ACQUIRING ASSET. SINCE BOTH PROVISIO NS WERE ALTOGETHER DIFFERENT, ASSESSEE WAS ENTITLED TO INCL UDE INTEREST PAID ON HOUSING LOAN FOR COMPUTATION OF CAPITAL GAINS U/ S 48 DESPITE THE FACT THAT SAME HAD BEEN CLAIMED U/S 24(B) WHILE COMPUTING INCOME FROM HOUSE PROPERTY. THE REVENUE'S APPEAL WA S DISMISSED BY THE ITAT, CHENNAI BENCH AND THE ORDER OF THE LD. CIT(A) WAS UPHELD. FROM THESE JUDICIAL PRONOUNCEMENTS, IT IS V ERY MUCH CLEAR ITA NO. 120/JP/2019 M/S PARWATI DEVI TOTLANI VS. ITO 8 THAT IF THE PROPERTY IS PURCHASED FROM BORROWED FUN DS THEN CONSIDERATION FOR THE PURCHASED AMOUNT, THE INTERES T ON BORROWED FUND ALSO HAS TO BE PAID. THE AMOUNT OF IN TEREST PAID BY THE ASSESSEE CONSTITUTES THE ACTUAL COST TO THE ASSESSEE FOR THAT PROPERTY. TO EXCLUDE THE INTEREST AMOUNT FROM THE ACTUAL COST OF THE ASSETS/PROPERTY WOULD LEAD ANOMALOUS RE SULT. THE INTEREST AMOUNT SHOULD BE DEFINITELY ADDED TO THE A CTUAL COST OF THE PROPERTY. RESPECTFULLY FOLLOWING THESE LEGAL PROPOSITIONS AND ON BASIS OF OUR OBSERVATIONS AS HELD HEREIN, WE REVERSE THE FINDING S OF THE LD. CIT(A) AND HOLD THAT THE INTEREST PAID TO BANK FOR ACQUIRING CAPITAL ASSET WOULD BE ELIGIBLE AS PART OF COST OF ACQUISITION. WE HOLD ACCORDINGLY. THE GROUNDS NO. 1 TO 4 OF THE ASS ESSEE'S APPEAL ARE ALLOWED. 12. WE THEREFORE FIND THAT THERE IS A CONSISTENT VI EW AMONG VARIOUS HONBLE HIGH COURTS AND WHICH HAS BEEN CONSISTENTLY FOLLOWED BY THE VARIOUS BENCHES OF THE TRIBUNAL THAT THE ASSESSEE I S ENTITLED TO INCLUDE INTEREST AS PART OF THE COST OF THE ASSETS WHILE CO MPUTING THE CAPITAL GAINS U/S 48 OF THE ACT. IN THE ABSENCE OF ANY CONT RARY AUTHORITY BROUGHT TO OUR NOTICE, THE ASSESSING OFFICER IS DIR ECTED TO ALLOW THE INTEREST EXPENSES OF RS.3,93,898/- PAID TO LIC HOUS ING FINANCE LTD. SUBJECT TO APPROPRIATE INDEXATION WHILE COMPUTING C APITAL GAINS U/S 48 OF THE ACT. ITA NO. 120/JP/2019 M/S PARWATI DEVI TOTLANI VS. ITO 9 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/02/2020. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 28/02/2020. * SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S PARWATI DEVI TOTLANI, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-7(2), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 120/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR.