Smt. Gayatri Maheshwari, JODHPUR V. ITO, JODHPUR

ITA 208/JODH/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1951 (ITAT-JODHPUR)
• Duration Of Justice: 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 11-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Keywords: Capital asset; Cost of acquisition
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, JODHPUR BENCH , JODHPUR BEFORE: SHRI BHAGCHAND, AM & SHRI PARTHA SARTHI CHA UDHARY, JM ITA NO. 208/JODH/2017 ASSESSMENT YEAR : 2013-14 GAYATRI MAHESHWARI, 122, PATRAKAR COLONY, NEW POWER HOUSE ROAD, JODHPUR. VS. I.T.O., WARD-1(2), JODHPUR. PAN /TAN NO.: AFIPM 1955 P APPELLANT RESPONDENT ASSESSEE BY : SHRI RAJENDRA JAIN (ADV) REVENUE BY: SHRI S.K. MEENA (JCIT D.R.) DATE OF HEARING : 04/05/2017 DATE OF PRONOUNCEMENT : 05/05/2017 ORDER PER: PARTHA SARTHI CHAUDHARY, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATES FR OM THE ORDER DATED 29/03/2017 PASSED BY THE LD. CIT(A)-1, JODHPUR FOR THE ASSESSMENT YEAR 2013-14, WHEREIN THE ASSESSEE HAS TAKEN FOLLOWING G ROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN UPHOLDING THE VALIDITY OF ORDER PAS SED BY THE AO. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD CIT(A) ERRED IN SUSTAINING DISALLOWANCE OF RS. 5,42 ,877/- ON ACCOUNT OF THE COST OF IMPROVEMENT WHILE COMPUTING THE CAPITAL GAIN. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD CIT(A) ERRED IN SUSTAINING CAPITAL GAINS OF RS. 5,4 7,465/- AS COMPUTED BY THE LD AO. FURTHER HOLDING THAT THE INT EREST PAID TO ITA 208/JODH/2017_ GAYATRI MAHESHWARI VS. ITO 2 BANK FOR ACQUIRED CAPITAL ASSETS WOULD NOT HAVE ELI GIBLE FOR PART OF COST OF ACQUISITION. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD CIT (A) ERRED IN DISREGARDING THE JUDICIAL DECISIONS RE LIED BY THE ASSESSEE AND RELYING ON THE DECISIONS WHICH HAS NO APPLICATION ON THE FACTS OF THE CASE OF THE ASSESSEE. 5 THAT THE PETITIONER MAY KINDLY BE PERMITTED TO R AISE ANY ADDITIONAL OR ALTERNATIVE GROUNDS AT OR BEFORE THE TIME OF HEA RING. 6. THE PETITIONER PRAYS FOR JUSTICE & RELIEF. 2. THOUGH, THE ASSESSEE HAS TAKEN MULTIPLE GROUNDS OF APPEAL. THE MAIN GRIEVANCE IS WITH REGARD TO SUSTAINING THE DISALLOW ANCE OF RS. 5,52,877/- ON ACCOUNT OF COST OF IMPROVEMENT WHILE COMPUTING THE CAPITAL GAIN. 3. THE BRIEF FACTS ARISING HEREIN ARE THAT THE ASSE SSEE IS AN INDIVIDUAL, DERIVED INCOME FROM INTEREST AND CAPITAL GAINS. SHE FILED THE RETURN OF INCOME FOR A.Y. 2013-14 ON 31-03-2014 ADMITTING THE TOTAL INCOME AT RS. 3,92,310/-. THE RETURN WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S 143(2) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WAS ISSUED ON 03-09-2014. AFTER HEARING THE ASSESSEE, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 23-11-2015 DETERMINING THE TOTAL INCOME AT RS. 9,39 ,780/- BY MAKING ADDITIONS / DISALLOWANCES. 4. BEFORE THE LD. CIT(A), THE ISSUE TO BE DECIDED A S REGARDS THE COMPUTATION OF CAPITAL GAIN IN RESPECT OF PROPERTY SOLD BY THE ASSESSEE DURING THE YEAR. IN THIS CONNECTION, THE AO DISCUSSED AS UNDER:- ITA 208/JODH/2017_ GAYATRI MAHESHWARI VS. ITO 3 'THE ASSESSEE'S SOURCE OF INCOME IS INTEREST -INCO ME AND INCOME FROM CAPITAL GAIN. THE ASSESSEE IS PARTNER IN FIRM M/S Y ASHOMA EXPORTS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE SO LD TWO PROPERTIES ONE PROPERTY WHICH IS A PLOT NO. 118, MASSURIA, A P ART PORTION OF THIS PLOT WAS SOLD BY ASSESSEE ALONGWITH ONE CO-SHARER T O THE TUNE OF RS. 44,00,000/-. ANOTHER PROPERTY SOLD BY THE ASSESSEE ALONGWITH TWO OTHER PARTNERS ON BEHALF OF FIRM M/S YASHOMA EXPORTS, PLO T NO. G- 564, 565 AT BORLANADA, JODHPUR. THE DETAILS OF CAPITAL GAIN EXE MPTIONS AND COPY SALE AND PURCHASE OF PROPERTY WERE SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ON GOING THROUGH THE COMPUT ATION OF INCOME IT REVEALS THAT THE ASSESSEE CLAIMED THE EXEMPTIONS ON PROPERTY I.E. COST OF ACQUISITION AND COST OF IMPROVEMENT AND INDEXED THE SAME. THE PLOT NO. 118 MASSURIA IS A RESIDENTIAL PLOT WHICH WAS PU RCHASED IN THE YEAR 2008 AND PART PORTION OF THIS PLOT WAS SOLD DURING THE RELEVANT ASSTT. YEAR. THE ASSESSEE'S HALF SHARE IN THIS PLOT. THE ASSESSEE TAKEN OVER LOAN FROM BANK ON THE ABOVE PROPERTY AND CLAIMED COST OF INDEX AND COST OF IMPROVEMENT ON TH E PAYMENT OF INTEREST. SO FAR AS COST OF ACQUISITION IS CONCERNE D, IT IS STATED THAT THE ASSESSEE INVESTED A SUM OF RS. 11,80,684/- IN THE Y EAR 2008 AND AFTER INDEXING THIS AMOUNT A SUM OF RS. 17,28,424/- COMES AS COST OF ACQUISITION AFTER INDEXING. THIS SEEMS CORRECT AND LIABLE TO BE DEDUCTED FROM THE COST OF SALE OF PROPERTY. AS REGARDS INTER EST PAID IN THE YEAR 2008-09 TO 2011-12 AND INDEXING THE SAME (I.E. INTE REST), THE SAME IS NOT ADMISSIBLE. AS THERE IS NO IMPROVEMENT ON THE P LOT AND NO CONSTRUCTIONS IS MADE ON PLOT HENCE, THE COST OF IM PROVEMENT AND INDEXING THE SAME IS NOT ALLOWABLE. FURTHERMORE, TH E ASSESSEE HAS TAKEN OVER LOAN FROM THE ICICI BANK FOR THE PURCHASE OF H OUSE PROPERTY WHICH IS ADMISSIBLE UNDER THE HEAD INCOME FROM HOUSE PROP ERTY, WHEREAS THE ITA 208/JODH/2017_ GAYATRI MAHESHWARI VS. ITO 4 ASSESSEE IS CLAIMING THE SAME UNDER THE HEAD INCOME FROM CAPITAL GAIN, HENCE, THE SAME IS NOT ADMISSIBLE. THE CASE LAWS CITED BY THE AR OF THE ASSESSEE WAS E XAMINED AND IT IS STATED THAT THE FACT OF THE CASE NARRATED IN THE CA SE LAWS IS DIFFERENT FROM THE PRESENT CASE. AS REGARDS CASE LAWS CITED B Y THE ASSESSEE OF HON'BLE DELHI HIGH COURT IT IS STATED THAT THE ISSU E INVOLVED IN THIS CASE IS 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE INTEREST AMOUNT OF RS. 16,878/- AND THE GROUND RENT OF RS. 3793/- CONSTITUTED PART OF THE ACTUAL COST OF THE PLOT TO THE ASSESSED FOR THE PURPOSE OF DETERMINING THE CAPITAL GAIN?' WHEREAS IN THE PRESENT CASE THE ASSESSEE IS INDEXIN G THE AMOUNT OF INTEREST PAID AS A COST OF IMPROVEMENT WHICH IS NOT RELEVANT FROM THE CITED CASE LAWS. AS REGARDS CASE LAWS CITED BY THE ASSESSEE OF HON'B LE ANDHRA HIGH COURT IT IS STATED THAT THE ISSUE INVOLVED IN THIS CASE IS 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE INTE REST AMOUNT OF RS. 11,344/- CONSTITUTED PART OF THE ACTUAL COST OF THE PLOTS TO THE ASSESSEE FOR PURPOSES OF DETERMINING THE CAPITAL GAINS FOR T HE ASSESSMENT YEAR 1967-68.?' WHEREAS IN THE PRESENT CASE THE ASSESSEE IS INDEXIN G THE AMOUNT OF INTEREST PAID AS A COST OF IMPROVEMENT WHICH IS NOT RELEVANT FROM THE CITED CASE LAWS. AS REGARDS CASE LAWS CITED BY THE ASSESSEE OF HON'B LE KARNATAKA HIGH COURT IT IS STATED THAT THE ISSUE INVOLVED IN THIS CASE IS 'WHETHER THE TRIBUNAL WAS CORRECT IN HOLDING THAT INTEREST PAYME NT OF A SUM OF RS. ITA 208/JODH/2017_ GAYATRI MAHESHWARI VS. ITO 5 37,45,042/- TO THE DIRECTOR BY THE ASSESSEE COMPANY TOWARDS LOAN AVAILED FOR PURCHASE OF THE PROPERTY (ASSET) SHOULD BE ADDED TO THE COST OF ACQUISITION OF THE ASSET WHEN COMPUTING LONG TER M CAPITAL GAINS BY QUANTIFICATION OF THE INTEREST AFTER SALE OF THE PR OPERTY ?' WHEREAS IN THE PRESENT CASE THE ASSESSEE IS INDEXIN G THE AMOUNT OF INTEREST PAID AS A COST OF IMPROVEMENT WHICH IS NOT RELEVANT FROM THE CITED CASE LAWS. HENCE, THE CASE LAWS SUBMITTED BY THE AR OF THE ASS ESSEE ARE NOT RELEVANT IN THE PRESENT CASE.' ACCORDINGLY, THE AO ADOPTED THE SALE CONSIDERATION OF PLOT AS RS. 22,75,889/- AND COMPUTED THE CAPITAL GAINS AS BELOW :- SALE CONSIDERATION OF PLOT AT MASSURIA RS. 22,75, 889/- LESS; COST OF ACQUISITION AS CLAIMED BY ASSESSEE IN COMPUTATION 1180684/582*812 RS.(-) 17, 28,424/- CAPITAL GAIN RS. 5,47,465/- 5. THE ASSESSEE FILED WRITTEN SUBMISSIONS BEFORE TH E LD. CIT(A) AT THE TIME OF HEARING. THE RELEVANT PORTIONS OF THE WRITTEN SU BMISSIONS ARE REPRODUCED AS UNDER:- 1. THAT DISALLOWANCES OF RS. 5,42,877/- IN RESPECT OF DISALLOWING THE COST OF IMPROVEMENT IN RESPECT OF INTEREST PAID ON BORROWED FUND FOR PURCHASE OF CAPITAL ASSETS WHILE COMPUTING THE CAPITAL GAIN IS TOTALLY ERRONEOUS AS THE ASSESSEE HAS CAPITALIZED THE INTEREST PAID ON THE B ORROWING FUND FOR PURCHASE OF SUCH PROPERTY AND THE BENEFIT OF INDEXATION U/S 48 WAS CLAIMED ACCORDANCE WITH PROVISION OF THE LAW. 2. IT IS UNDISPUTED FACT THAT THE EXPENDITURE IN RESPE CT OF INTEREST PAID TO BANK ON ACCOUNT OF PURCHASE OF PROPERTY BEING RELATED TO SU CH PROPERTY AND AS SUCH ITA 208/JODH/2017_ GAYATRI MAHESHWARI VS. ITO 6 WHILE COMPUTING THE AMOUNT OF CAPITAL GAIN SUCH EXP ENDITURE MUST BE DEDUCTED AS HELD BY HON'BLE DELHI COURT IN THE CASE OF CIT VS ROHTAK TEXTILE REPORTED IN 138 1TR 195, AND SAME WAS FOLLOWED IN F OLLOWING CASES: A. 150 1TR 80 (MADRAS) B. 152 ITR 247 (KARN.) C. 152 1TR 482 (MADRAS) D. 107 1TR 557 (KARN.) E. 107 ITR 840 (MADRAS) F. CIT V. K. RAJA GOPALA RAO (2001) 252 ITR 459 (M AD) 4. HERE, THERE CAN BE NO DOUBT THAT THE COST OF AC QUISITION TO THE ASSESSEE WAS NOT MERELY THE AMOUNT THAT HE HAD PAID TO THE V ENDORS BUT ALSO THE COST OF THE BORROWING MADE BY HIM FOR THE PURPOSE OF PAY ING THE VENDOR AND OBTAINING THE SALE DEED... WITHOUT THE MONEY BORROW ED, THE ASSESSEE WOULD NOT HAVE BEEN IN A POSITION TO BUY THE PROPERTY... PAYMENT OF CONSIDERATION FOR THE SALE INDISPUTABLY HAVING BEEN MADE WITH THE BORROWED FUNDS, THE BORROWING DIRECTLY RELATED TO THE ACQUISITION AND, INTEREST PAID THEREON WOULD FORM PART OF THE COST OF ACQUISITION. (EMPHASIS S UPPLIED) G. CIT AND ITO V HARIRAM HOTELS (P) LTD. (2010) 229 CTR 455 (KAR) THE 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 INCLUDED WHILE C ALCULATING THE COST OF ACQUISITION OF THE ASSET. H. THE KARNATAKA HIGH COURT IN THE CASE OF CIT V MAITHREYI PAI (1985) 152 ITR 247 (KAR) OBSERVED AS UNDER: MR. BHAT, HOWEVER, SUBMITTED THAT SECTION 48 SHOULD BE EXAMINED INDEPENDENTLY WITHOUT REFERENCE TO SECTION 57. SECT ION 48 PROVIDES FOR DEDUCTING FROM THE FULL VALUE OF CONSIDERATION RECE IVED THE COST OF ACQUISITION OF THE CAPITAL ASSET AND THE COST OF IMPROVEMENTS, IF ANY. THE INTEREST PAID ON BORROWINGS FOR THE ACQUISITION OF A CAPITAL ASSET M UST FALL FOR DEDUCTION UNDER SECTION 48. 3. IT IS SUBMITTED THAT INTEREST ON SUCH LOAN IS A PART OF ACQUISITION OF COST AND THE COMPUTATION OF CAPITAL GAIN IS PROVIDED IN SECTION 48 OF THE ACT. ACCORDING TO THE SECTION, THE ONLY DEDUCTIONS WHICH ARE ALLOWABL E ARE - (I) THE COST OF ACQUISITION OF THE ASSET, (2) THE COST OF ANY IMPRO VEMENT THERETO AND (3) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH THE TRANSFER OF THE ASSET. THE ASSESSEE ADDED THAT INTEREST TO THE COST OF INVESTMENT WHICH IS ITA 208/JODH/2017_ GAYATRI MAHESHWARI VS. ITO 7 ACCORDANCE WITH LAW. THE OBSERVATION OF THE ID AO T HAT CLAIM OF THE ASSESSEE WAS NOT ALLOWABLE UNDER HEAD OF CAPITAL GAIN WHICH IS TOTALLY ERRONEOUS AS THE ASSESSEE HAS SOLD THE LAND AND INTEREST PAID TO BAN K FOR ACQUIRING OF SUCH LAND. IN THIS REGARDS I RELY ON THE DECISION CHENNAI TRIB UNAL (AC IT V C.RAMABRAHMAM) IN 2012, 'AFTER PERUSING THE ABOVE SAID PROVISIONS, WE ARE OF THE OPINION THAT DEDUCTION UNDER SECTION 24(B) AND COMPUTATION OF CA PITAL GAINS UNDER SECTION 48 OF THE ACT ARE ALTOGETHER COVERED BY DIFFERENT HEADS OF INCOME I.E., INCOME FROM 'HOUSE PROPERTY AND CAPITAL GAINS . FURTHER, A PERUSAL OF BOTH THE PROVISIONS MAKES IT UNAMBIGUOUS THAT NONE OF TH EM EXCLUDES OPERATIVE OF THE OTHER. IN OTHER WORDS, A DEDUCTION UNDER SECTIO N 24(B) IS CLAIMED WHEN CONCERNED ASSESSEE DECLARES INCOME FROM 'HOUSE PROP ERTY, WHEREAS, THE COST OF THE SAME ASSET IS TAKEN INTO CONSIDERATION WHEN IT IS SOLD AND CAPITAL GAINS ARE COMPUTED UNDER SECTION 48. WE DO NOT HAVE EVEN A SLIGHTEST DOUBT THAT THE INTEREST IN QUESTION IS INDEED AN EXPENDITURE I N ACQUIRING THE ASSET. SINCE BOTH PROVISIONS ARE ALTOGETHER DIFFERENT, THE ASSES SEE IN THE INSTANT CASE IS CERTAINLY ENTITLED TO INCLUDE THE INTEREST AMOUNT A T THE TIME OF COMPUTING CAPITAL GAINS UNDER SECTION 48 OF THE ACT. IN VIEW OF ABOVE, THE DISALLOWANCE MADE BY AO MAY K INDLY BE DELETED. 6. THE LD. CIT(A) ON CONSIDERATION OF THE ASSESSMEN T ORDER, ASSESSEES SUBMISSIONS AND THE CASE LAWS RELIED UPON BY THE AS SESSEE, HAS HELD AS UNDER:- THE ONLY DISPUTE IN THE INSTANT CASE IS WHETHER TH E INTEREST PAID BY THE ASSESSEE TO THE BANK ON LOAN AVAILED FOR PURCHASE OF PROPERTY C OULD BE ALLOWED AS DEDUCTION IN COMPUTING THE CAPITAL GAINS INCOME. THE CHARGE OF I NCOME-TAX IS CREATED BY VIRTUE OF THE PROVISIONS CONTAINED IN SECTION 4 ACCORDING TO WHICH THE INCOME-TAX IS CHARGED FOR THE RELEVANT ASSESSMENT YEAR IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF ACT IN RESPECT OF THE TOTAL INCOME OF THE RELEVANT PREVIOUS YEAR OF EVERY PERSON. AS PER THE SCHEME OF THE ACT, INCOME IS BROADLY CLASSI FIED UNDER FIVE DIFFERENT HEADS AND THE INCOME CHARGEABLE TO TAX UNDER THESE HEADS HAS TO BE COMPUTED AS PER THE RELEVANT PROVISIONS APPLICABLE TO RESPECTIVE HEADS OF INCOME. SECTION 45 TO SECTION 55A FALLING UNDER CHAPTER IV- E DEAL WITH ASSESSMEN T OF INCOME UNDER THE HEAD 'CAPITAL GAINS' AND SECTION 48 IN PARTICULAR PRESCR IBES THE MODE OF COMPUTATION OF ITA 208/JODH/2017_ GAYATRI MAHESHWARI VS. ITO 8 CAPITAL GAINS. AS PROVIDED IN SECTION 48, EXPENDITU RE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER AND THE COST OF ACQUISI TION OF THE ASSET AND COST OF ANY IMPROVEMENT THERETO ARE DEDUCTIBLE FROM THE FULL VA LUE OF THE CONSIDERATION RECEIVED OR ACCRUING TO THE ASSESSEE AS A RESULT OF TRANSFER OF THE CAPITAL ASSETS. IN THE INSTANT CASE, THE DEDUCTION ON ACCOUNT OF INTEREST PAID TO BANK HAS BEEN CLAIMED BY THE APPELLANT AS DEDUCTION IN COMPUTING CAPITAL GAINS. THE APPELLANT, HOWEVER, HAS FAILED TO EXPLAIN AS TO HOW THE SAID INTEREST COULD BE CONSIDERED AS COST OF ACQUISITION OF THE LAND OR THE COST OF ANY IMPROVEM ENT THERETO. SHE HAS ALSO FAILED TO EXPLAIN AS TO HOW THE INTEREST PAID COULD BE TREATE D AS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SALE OF LAND. ON THE OTHER HAND, THE BASIS ON WHICH THE INTEREST WAS PAID BY THE APPELLANT SHOWED THAT IT HAD NO DIRECT NEXUS WITH THE PURCHASE AND SALE OF LAND AND AS RIGHTLY CONTEN DED BY THE AO, THE INTEREST PAID WAS ALLOWABLE AS DEDUCTION AGAINST INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HAVING REGARD TO ALL THESE FACTS OF THE CASE, I AM OF THE OPINION THAT THE INTEREST PAID BY THE APPELLANT COULD NOT BE TREATED AS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SALE OR THE COST OF ACQUISITION/IMPROVEMENT OF THE LAND BEING SOLD SO AS TO BE ELIGIBLE FOR DEDUCTION IN COMPUTING CAPITAL GAINS UNDER SECTION 48. THE LD. CIT(A) OPINED THAT THE INTEREST AMOUNTS PAI D BY THE ASSESSEE TO THE BANK WITH THE F.Y. 2007-08 TO 2012-13 WERE NOT DEDU CTIBLE IN COMPUTING HE CAPITAL GAINS AS RIGHTLY HELD BY THE ASSESSING OFFI CER AND THE ORDER OF THE ASSESSING OFFICER WAS UPHELD. 7. BEING FURTHER AGGRIEVED, THE ASSESSEE IS IN APPE AL BEFORE US. THE LD AR OF THE ASSESSEE HAS REITERATED THE SUBMISSIONS AS M ADE BEFORE THE LD. CIT(A) AND ALSO RELIED ON THE DECISION OF THE HON'BLE DELH I HIGH COURT IN THE CASE OF CIT VS. MITHLESH KUMARI (1973) 92 ITR 9 (DELHI). ITA 208/JODH/2017_ GAYATRI MAHESHWARI VS. ITO 9 8. ON THE OTHER HAND, THE LD. D.R. HAS RELIED ON TH E ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE PERUSED THE CASE RECORDS, ANALYSED THE F ACTS AND CIRCUMSTANCES OF THE CASE AND CONSIDERED THE JUDICI AL PRONOUNCEMENTS, WHICH WAS PLACED BEFORE US. IN THE CASE OF CIT VS. MITHIL ESH KUMARI (SUPRA), THE HON'BLE HIGH COURT 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 ABOV E. IN THE PRESENT CASE, WE FIND THAT THE ASSESSED IN ORDER TO PURCHASE THE LAN D HAD NOT ONLY TO BORROW THE AMOUNT OF RS. 95,000.00 WHICH WAS THE CONSIDERATION FOR THE PURCHASE 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 THE INTEREST PAID BY THE ASSESSED CONSTITUTES THE ACTUAL COST TO THE ASSESSED 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 INTEREST OF RS. 16,878.00 WAS PAID TO A D IFFERENT PERSON, NAMELY, HER MOTHER-IN-LAW, DOES NOT MAKE ANY DIFFERENCE SO FAR AS THE ASSESSED IS CONCERNED IN RESPECT OF THE ACTUAL COST OF THE LAND TO HER. IT WILL NOT ALSO MAKE ANY DIFFERENCE WHETHER THE INTEREST WAS PAID ON THE DATE OF THE PURCHASE OR WHETHER IT IS PAID SUBSEQUENTLY. TO EXCLUDE THE INT EREST AMOUNT FROM THE ACTUAL COST OF THE ASSETS WOULD LEAD TO ANOMALOUS R ESULTS. SUPPOSING SHE HAD PURCHASED THE LAND FOR RS. 1,00,000.00 BY RAISING A LOAN OF THAT 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 UNREASONABLE TO HOLD U NDER SUCH CIRCUMSTANCES BY EXCLUDING THE INTEREST AMOUNT FROM THE ACTUAL COST OF THE LAND THAT SHE HAD MADE A CAPITAL GAIN OF RS. 20,000.00 WHEN, AS A MAT TER OF FACT, SHE HAD NOT MADE ANY PROFIT AT ALL BY THE TRANSACTION. APPLYING THE SAID OBSERVATIONS OF THE CALCUTTA AND THE BOMBAY HIGH COURTS TO THE PRESENT CASE, WE HOLD THAT THE TRIBUNAL WAS RIGHT IN ADDITING THE INTEREST AMOUNT OF RS. 16,878.00 TOWAR DS 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 COURT HAS HEL D AS UNDER:- ITA 208/JODH/2017_ GAYATRI MAHESHWARI VS. ITO 10 7. WE ARE UNABLE TO AGREE WITH THE ARGUMENTS ADVAN CED BY THE LEARNED COUNSEL FOR THE REVENUE FOR THE SIMPLE REASON ON FA CTS THAT EVEN THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS HELD THAT INTEREST HAD ACCRUED AS ON 31/3/2003 AND THEREFORE, THE TRIBUNAL IS JUSTIFI ED IN GRANTING THE RELIEF TO THE ASSESSEE SINCE THE PROPERTY HAS BEEN PURCHASED OUT OF THE LOAN BORROWED FROM THE DIRECTORS AND ANY INTEREST PAID T HEREON IS TO BE INCLUDED WHILE CALCULATING THE COST OF ACQUISITION OF THE AS SET. THEREFORE, QUESTION NO. 1 HAS TO BE ANSWERED AGAINST THE REVENUE. 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 PUR CHASED HOUSE PROPERTY, AVAILING LOAN. THE HOUSE PROPERTY WAS SUBSEQUENTLY SOLD AND ASSESSEE INCLUDED INTEREST PAID ON HOUSING LOAN WHILE COMPUT ING 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 CONSIDERATION FOR COMPUTATION U/S 48 AND INTEREST AMOUNT WAS ADDED TO INCOME OF ASSESSEE. THE CIT(A) REVERSED TH E 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 INCOME I.E., INCOME F ROM HOUSE PROPERTY AND CAPITAL GAINS. NONE OF THEM EXCLUDES OPERATIVE OF THE OTHER. THE INTEREST IN QUESTION WAS INDEED EXPENDITURE IN ACQUIRING ASSET. SINCE BOTH PROVISIONS WERE ALTOGETHER DIFFERENT, ASSESSEE WAS ENTITLED TO INCLUDE INTEREST PAID ON HOUSING LOAN FOR COMPUTATION OF CAPITAL GAINS U/S 4 8 DESPITE THE FACT THAT SAME HAD BEEN CLAIMED U/S 24(B) WHILE COMPUTING INCOME F ROM HOUSE PROPERTY. THE REVENUES APPEAL WAS DISMISSED BY THE ITAT, CHENNAI BENCH AND THE ORDER OF THE LD. CIT(A) WAS UPHELD. FROM THESE JUDICIAL PRO NOUNCEMENTS, IT IS VERY ITA 208/JODH/2017_ GAYATRI MAHESHWARI VS. ITO 11 MUCH CLEAR THAT IF THE PROPERTY IS PURCHASED FROM B ORROWED FUNDS THEN CONSIDERATION FOR THE PURCHASED AMOUNT, THE INTERES T ON BORROWED FUND ALSO HAS TO BE PAID. THE AMOUNT OF INTEREST PAID BY THE ASSESSEE CONSTITUTES THE ACTUAL COST TO THE ASSESSEE FOR THAT PROPERTY. TO E XCLUDE THE INTEREST AMOUNT FROM THE ACTUAL COST OF THE ASSETS/PROPERTY WOULD L EAD ANOMALOUS RESULT. 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 CAPITA L ASSET WOULD BE ELIGIBLE AS PART OF COST OF ACQUISITION. WE HOLD ACCORDINGLY. T HE GROUNDS NO. 1 TO 4 OF THE ASSESSEES APPEAL ARE ALLOWED. 10. GROUNDS NO. 5 AND 6 ARE GENERAL IN NATURE, REQU IRES NO ADJUDICATION. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/05/2017. SD/- SD/- (BHAGCHAND) (PARTHA SARTHI CHAUDHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR DATED:- 05 TH MAY, 2017. *RANJAN COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SMT. GAYATRI MAHESHWARI, JODHPUR 2. THE RESPONDENT- THE ITO, WARD-1(2), JODHPUR. 3. CIT ITA 208/JODH/2017_ GAYATRI MAHESHWARI VS. ITO 12 4. THE CIT(A) 5. DR, ITAT, JODHPUR 6. GUARD FILE (ITA NO. 208/JODH/2017) BY ORDER, ASST. REGISTRAR