Ms.Lata Subramanian, Bangalore V. Asst. Commissioner of Income Tax, Bangalore

ITA 1570/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7348 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-08-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 31-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH
• Assessee Lawyers: MALLAH RAO
• Keywords: Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO. 1 57 0 / BANG/201 6 ASSESSMENT YEAR: 2011 12 MS. LATA SUBRAMANIAN, VILLA NO. 29, CHAITHANYAV ARMADALE, NEXT TO FORUM VALUE MALL, WHITEFIELD MAIN ROAD, BANGALORE 560 066. PAN: AA OPL5331R VS. ACIT CIRCLE 14[1], BANGALORE. APPELLANT RESPONDENT A SSESSEE BY : SHRI MALLAH R AO, ADVOCATE RE VENUE BY : SMT. B. R . RAMESH, JCIT DR DATE OF HEARING : 13 . 11 .201 7 DATE OF PRONOUNCEMENT : 15 .1 1 .2017 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THIS IS D IRECTED AGAINST THE ORDER OF CIT (A) 12, BANGALORE DATED 27.07.2016 FOR A ASSE SSMENT YEARS 2011 12. 2. THE ASSESSEE HAS RAISED AS MANY AS 8 GROUNDS BUT THE ONLY EFFECTIVE GRIEVANCE OF THE ASSESSEE IS REGARDING THE REJECTIO N OF THE ASSESSEES CLAIM THAT INTEREST OF RS. 14,44,658/- PAID ON LOAN BORRO WED FROM BANK TO INVEST IN PROPERTY SHOULD BE CONSIDERED AS COST OF ACQUISITIO N FOR COMPUTING THE CAPITAL GAIN ON SALE OF THAT PROPERTY. 3. AS PER THE FACTS NOTED BY THE AO IN PARA 5 OF TH E ASSESSMENT ORDER, THE ASSESSEE CLAIMED CARRY FORWARD OF SHORT TERM CAPITA L LOSS OF RS. 989,622/-. THE AO FURTHER NOTED THAT THE ASSESSEE HAS CAPITALIZED INTEREST ON LOAN BORROWED FROM BANK FOR THE PURCHASE OF SHOBHA SUNCREST APART MENT AND SUCH ITA NO. 1570/BANG/2016 PAGE 2 OF 4 CAPITALIZATION IS OF RS. 585,670/- IN FY 2008 09 AND RS. 858,989/- IN FY 2009 10. AS PER THE AO, AS PER SECTIONS 49 R.W.S. 48, COST OF ACQUISITION MEANS THE COST PAID TO THE PREVIOUS OWNER TO ACQUIRE THE PROP ERTY INCREASED BY COST OF IMPROVEMENT, IF ANY. THE AO DISALLOWED THIS CLAIM O F CAPITALIZATION OF INTEREST AS COST OF ACQUISITION. BEING AGGRIEVED, THE ASSESS EE CARRIED THE MATTER IN APPEAL BEFORE CIT (A) BUT WITHOUT SUCCESS AND NOW T HE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. LEARNED AR OF THE ASSESSEE PLACED RELIANCE ON A JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS . SRI HARIRAM HOTELS (P) LTD. AS REPORTED IN 229 CTR 455. LEARNED DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FACTS ARE UNDISPUTED AS NOTED ABOVE AND UNDER THESE FACTS, WE FIND NO INFIRMITY I N THE ORDERS OF THE LOWER AUTHORITIES. WE ALSO FIND THAT AS PER COPY OF COMPU TATION OF INCOME FOR AY 2009 10 AND AY 2010 11 AVAILABLE ON PAGE 6 AND 9 OF THE PAPER BOOK, THE ASSESSEE HAS REPORTED INCOME FROM HOUSE PROPERTY IN RESPECT OF ANOTHER PROPERTY BUT NOT IN RESPECT OF THIS PROPERTY. HENCE , IT HAS TO BE ASSUMED THAT THIS IS A SELF OCCUPIED HOUSE PROPERTY FOR WHICH NO RENTAL INCOME IS TAXABLE BECAUSE, IN SPITE OF SPECIFIC QUERY OF BENCH, LEARN ED AR OF THE ASSESSEE COULD NOT GIVE ANY REPLY AS TO WHETHER THIS IS A LET OUT PROPERTY OR SELF OCCUPIED PROPERTY. MOREOVER, WHATEVER BE THE FACT ON THIS AS PECT, IT WILL NOT CHANGE THE RESULT BECAUSE FOR LET OUT AND SELF OCCUPIED PROPER TY BOTH, INTEREST ON LOAN BORROWED TO ACQUIRE THE PROPERTY IS ALLOWABLE AS DE DUCTION U/S 24 AND IT CANNOT BE CONSIDERED AS A PART OF COST OF ACQUISITION. NOW WE EXAMINE THE APPLICABILITY OF THE JUDGMENT CITED BY THE LEARNED AR OF THE ASSE SSEE. AS PER THE FACTS NOTED IN PARA 3 OF THIS JUDGMENT, A PROPERTY WAS ACQUIRED BY THE ASSESSEE TO PUT UP A HOTEL OUT OF BORROWED FUNDS AND THE PROJECT COULD N OT BE MATERIALIZED AND ULTIMATELY, THE PROPERTY WAS SOLD. UNDER THESE FACT S, IT WAS HELD BY THE TRIBUNAL THAT INTEREST SHOULD BE CAPITALIZED AND HONBLE KAR NATAKA HIGH COURT UPHELD THIS TRIBUNAL ORDER. IN THAT CASE, THE MAIN CONTENT ION OF THE REVENUE WAS THIS THAT AFTER SELLING THE PROPERTY, A RESOLUTION IS PASSED BY THE COMPANY TO PAY THE ITA NO. 1570/BANG/2016 PAGE 3 OF 4 INTEREST TO DIRECTORS AND HENCE, THERE WAS NO INTER EST LIABILITY ON THE DATE OF SALE. IN THE PRESENT CASE AND IN THAT CASE, FACTS A RE MATERIALLY DIFFERENT. IN THAT CASE, THE PROPERTY IN QUESTION WAS ACQUIRED TO PUT UP A HOTEL BUILDING AND THAT PROJECT DID NOT MATERIALIZE. HENCE, INTEREST IN THA T CASE WAS ALTHOUGH ALLOWABLE U/S 36 (1) (III) BUT SINCE, THE BUSINESS DID NOT CO MMENCE, IT CANNOT BE CLAIMED OR ALLOWED. UNDER THOSE FACTS, CAPITALIZATION OF IN TEREST WAS APPROVED. IN THE PRESENT CASE, INTEREST IS ALLOWABLE U/S 24 AND THIS IS NOT THE CASE OF THE ASSESSEE THAT U/S 24, INTEREST CANNOT BE CLAIMED OR ALLOWED. THEREFORE, IN THE PRESENT CASE, IT CANNOT BE CAPITALIZED. MOREOVER, I N THAT CASE, THIS WAS NOT AN OBJECTION OF THE REVENUE THAT INTEREST CANNOT BE CA PITALIZED. THE OBJECTION WAS THIS THAT SINCE THE INTEREST IS QUANTIFIABLE AFTER DATE OF SALE, IT CANNOT BE CAPITALIZED. IN OUR CONSIDERED OPINION, THE RATIO O F THIS JUDGMENT IS THIS THAT EVEN IF THE INTEREST IS QUANTIFIED IN THE LIGHT OF BOARD RESOLUTION OF A DATE AFTER DATE OF SALE, IT CAN STILL BE CAPITALIZED AND THERE IS NO D ECISION ON THIS ASPECT THAT CAPITALIZATION PER SE IS PROPER OR NOT. IN THE PRES ENT CASE, THE OBJECTION OF THE REVENUE IS THIS THAT CAPITALIZATION OF INTEREST IS PER SE NOT JUSTIFIED. HENCE, THIS JUDGMENT RENDERS NO HELP TO THE ASSESSEE IN THE PRE SENT CASE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (LALIET KUMAR) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 15 TH NOVEMBER, 2017. /MS/ ITA NO. 1570/BANG/2016 PAGE 4 OF 4 COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.