SMT JAYA J KANUNGO L/H LATE SHRI JAWAHAR P KANUNGO, MUMBAI V. ACIT 15(3), MUMBAI

ITA 7731/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7829 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 16-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: USHA GAIKWADLD
• Assessee Lawyers: RAJ KUMAR SINGH LD
• Keywords: Cost of acquisition; Set aside; Capital Gains
• Section: 143(3); 201

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUM AR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO. 7731 /M UM/ 2019 ( / ASSESSMENT YEAR: 201 1 - 12 ) SMT. JAYA J. KANUNGO, ( L /H LATE SHRI JAWAHAR P. KANUNGO) 44, MANAK HOUSE C. P. TANK ROAD MUMBAI - 400 004 / VS. ACIT 1 5 (3) 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI - 400 007 ./ ./ PAN/GIR NO. A A KPK - 35 3 1 - G ( / APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI RAJ KUMAR SINGH , LD. AR REVENUE BY : MS. USHA GAIKWAD , LD. SR . DR / DATE OF HEARING : 09 /08 /2021 / DATE OF PRONOUNCEMENT : 01/09/2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR (AY) 2011 - 12 ARISES OUT OF THE ORDER OF LEAR NED COMMISSIONER OF INCOME - TAX (APPEALS) - 51 , MUMBAI [CIT(A)], DATED 18/09 /20 19 IN THE MATTER OF ASSESSMENT FRAMED BY LD. ASSESSING OFF ICER (AO) U/S 143(3) OF THE ACT ON 27/03/2014. THE GROUNDS READ AS UNDER : - 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ID. CIT (APPEALS) HAS LEGALLY ERRED I N DISALLOWING THE ENTIRE LAWFUL INDEXED INTEREST CLAIM OF APPELLANT 2 MADE AT RS. 20,10,785/ - PAID ON BORROWED FUND UTILIZED TO PAY THE PURCHASE COST OF THE LAND SOLD DURING THE YEAR AND CLAIMED AS IMPROVE MENT COST WHICH INDEXED INTEREST CLAIM WAS EVEN PARTLY ALLOWED BY ID .A.O. TO THE EXTENT OF RS.13,46,245/ - . IN VIEW OF THE ABOVE APPELLANT HUMBLY PRAYS THAT INTEREST IMPROVEMENT CLAIM OF RS.20,10,785/ - MADE BEING CORRECT AS PER TAX LAW PROVISIONS HENCE SAM E MAY KINDLY BE ALLOWED AND ACTION OF BOTH THE INCOME TAX AUTHORITIES CONTRARY TO TAX LAW PROVISIONS MAY BE SET ASIDE. 2. HAVING HEARD RIVAL SUBMISSIONS AND UPON PERUSAL OF RELEVANT MATERIAL ON RECORD , OUR ADJUDICATION WOULD BE AS GIVEN IN SUCCEEDING PARA GRAPHS. 3. THE MATERIAL FACTS ARE THAT THE ASSESSEE SOLD PART OF LAND AS PER AGREEMENT DATED 25/06/2010 FOR SALE CONSIDERATION OF RS.110 LACS. THE PROPORTIONATE COST AS PER CONVEYANCE DEED DATED 03/09/2001 WAS RS.7.44 LACS. HOWEVER, AS PER THE ASSESSEE, TH E AGREEMENT FOR PURCHASE OF LAND WAS MADE ON 20/06/1988. THE ASSESSEE PAID INTEREST OF RS.8.06 LACS DURING THE YEARS 1994 TO 1998 ON FUNDS BORROWED TO ACQUIRE THE LAND. THUS, APPLYING THE INDEXES OF VARIOUS YEARS TO THE PROPORTIONATE COST OF LAND AS WELL A S INTEREST PAID, IT COMPUTED LONG - TERM CAPITAL GAINS OF RS.52.94 LACS AND OFFERED THE SAME TO TAX . HOWEVER, LD. AO OPINED THAT THE DATE OF EXECUTION OF CONVEYANCE DEED (03/09/2001) WAS TO BE TAKEN AS THE DATE OF ACQUISITION OF LAND AND THEREFORE THE INDEXA TION WOULD APPLY ONLY FROM AY 2002 - 03. ACCORDINGLY, INDEXING THE PROPORTIONATE COST OF LAND AS WELL AS INTEREST COST FROM AY 2002 - 03, THE GAINS WERE RECOMPUTED AT RS.80.02 LACS. 4. UPON FURTHER APPEAL, LD. CIT(A) CONCURRED THAT THE INDEXATION WOULD BE AVAI LABLE ON PROPORTIONATE COST OF LAND FROM THE YEAR 1988. HOWEVER, INTEREST COULD NEITHER BE CONSIDERED AS COST OF ACQUISITION NOR COST OF IMPROVEMENT WHILE COMPUTING THE GAINS. ACCORDINGLY, LD. AO WAS 3 DIRECTED TO RE - WORK THE GAINS. AGGRIEVED, THE ASSESSEE I S IN FURTHER APPEAL BEFORE US. 5. UPON PERUSAL OF ASSESSEES COMPUTATION OF INCOME FOR VARIOUS YEARS, IT COULD BE GATHERED THAT INTEREST PAID ON BORROWING HAS BEEN CAPITALIZED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS ALONG WITH THE COST OF LAND AND NO DEDU CTION OF THE SAME HAS EVER BEEN CLAIMED BY THE ASSESSEE. FOR THE SAME REASON, LD. AO HAS ALREADY ACCEPTED THE INTEREST COST AS PART OF COST OF ACQUISITION AND ALLOWED INDEXATION ON THE SAME , THOUGH FROM AY 2002 - 03 . THE LD. CIT(A) OPINED THAT THE INTEREST C OST COULD NEITHER BE CONSIDERED AS COST OF ACQUISITION NOR COST OF IMPROVEMENT AND THEREFORE, THE SAME WOULD NOT, AT ALL, BE ALLOWED AS DEDUCTION. WE ARE OF THE CONSIDERED OPINION THAT IT IS UNDISPUTED FACT THAT THE BORROWED FUNDS HAD DIRECT NEXUS WITH ACQ UISITION OF THE PROPERTY AND THE INTEREST HAS BEEN CAPITALIZED IN THE BOOKS ALONG WITH COST OF LAND. THE SAID INTEREST HAS BEEN PAID PRIOR TO DATE OF EXECUTION OF CONVEYANCE DEED. THEREFORE, THE INTEREST COST HAVING DIRECT NEXUS WITH ACQUISITION OF LAND, W OULD BE AVAILABLE FOR DEDUCTION AS PART OF COST OF ACQUISITION OF THE LAND. THE ASSESSEE HAS CLAIMED DEDUCTION OF THE SAME BY APPLYING THE INDEXES OF RESPECTIVE YEARS IN WHICH THE INTEREST HAS ACTUALLY BEEN PAID. THE LD. AO IS DIRECTED TO ALLOW THE SAME IN THE SAME MANNER, AS CLAIMED BY THE ASSESSEE. 6. THE APPEAL STANDS ALLOWED. ORDER PRONOUNCED ON 1 ST SEPTEMBER, 2021. SD/ - SD/ - (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED : 01/09/2021 SR.PS, DHANANJAY 4 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERN ED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.