IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND
SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
./I.T.A. No. 4954/Mum/2012
( [ [ / Assessment Year : 2010-11
Smt. Neelam Sunil The ACIT,
Soorma, Central Circle-15 & 16,
11, Shiv Shakti, Plot No.30, Aayakar Bhavan,
N.S. Road No. 10, Mumbai-400 020
Juhu Scheme, Juhu,
Mumbai-400 049
. / . / PAN/GIR No. : AEXPS 4136C
( /Appellant) .. (× / Respondent)
/ Appellant by: Shri Nishit Gandhi
× /Respondent by: Shri S.J. Singh
/ Date of Hearing :12.03.2015
/Date of Pronouncement :18.03.2015
/ O R D E R
PER N.K. BILLAIYA, AM:
This appeal by the assessee is preferred against the order of the Ld.
CIT(A)-39, Mumbai dt. 01.06.2012 pertaining to assessment year 2010-
11.
2 ITA No. 4954/M/2012
2. The sole grievance of the assessee is that the Ld. CIT(A) erred in
not allowing interest paid for acquisition of flat of Rs. 18,20,679/- as part
of the cost of flat sold.
3. It is the claim of the assessee that the Assessing Officer should be
directed to allow interest paid for acquisition of flat as part of the Cost of
Flat sold.
4. The assessee is in the business of Film production, Management of
the entertainment/Event Shows and Display of Fireworks. The return for
the year under consideration was selected for scrutiny assessment.
5,. During the course of the scrutiny assessment proceedings, inter
alia, the AO noticed that the assessee has shown Short Term Capital loss
of Rs. 16,81,989/-. The assessee was asked to explain the same. The
assessee explained that the assessee has sold a property for Rs.
1,31,00,000/- for which the cost of acquisition is shown at Rs.
1,47,81,989/-. The cost of acquisition was further explained to be the
purchase cost of the flat at Rs. 1,21,60,000/- + stamp duty of Rs.
7,70,610/- + registration charges Rs. 30,700/- totaling to Rs.
1,29,61,310/-.
5.1. The AO further observed that the stamp duty value of the said
property was at Rs. 1,83,36,990/-. According to the AO, the assessee has
not only shown higher cost of acquisition but has also under valued the
sale price. The assessee was asked to explain why provisions of Sec. 50C
of the Act should not be applied. In her reply, the assessee stated that the
cost of acquisition includes interest on housing loan which is capitalized
3 ITA No. 4954/M/2012
by the assessee and the stamp duty value taken by the valuation authority
is on the higher side.
6. The submissions made by the assessee did not find convincing.
The AO was of the firm belief that the interest capitalized by the assessee
does not form the component of purchase price. Moreover, the assessee
has taken benefit of interest paid on housing loan from the income from
house property separately. In so far as the Stamp duty value is
concerned, the AO held that it has to be taken as per the provisions of
Sec. 50C of the Act. The AO recomputed the capital gains as follows:
Sale price as per the Stamp Rs. 1,83,36,919/-
Valuation Authority
(As per agreement for sale dt.
26.6.2009)
Less: Cost of acquisition 1,21,60,000/-
(As per agreement for purchase
dt. 29.9.2006)
Stamp duty & Registration 8,01,310/- 1,29,61,310/-
charges
Short Term Capital Gain 53,75,609/-
7. Aggrieved by this, the assessee carried the matter before the Ld.
CIT(A). In so far as the stamp duty value of property is concerned, the
assessee successfully convinced the Ld. CIT(A) to direct the AO to refer
the matter to the DVO. This is not the issue before us.
7.1. In so far as the claim of interest on housing loan is concerned, the
Ld. CIT(A) observed that the house property was purchased in the
accounting year relevant to assessment year 2008-09 and the assessee
has been claiming interest on housing loan as a deduction under the head
4 ITA No. 4954/M/2012
`Income from house property'. The Ld. CIT(A) was of the opinion that
the interest expenditure cannot be considered as cost of improvement and
confirmed the findings of the AO.
8. Aggrieved by this, the assessee is before us.
9. The Ld. Counsel for the assessee reiterated what has been stated
before the lower authorities. In support of the claim, the Ld. Counsel
relied upon the decision of the Tribunal, Chennai Bench in the case of
ACIT Vs C. Ramabrahmam 57 SOT 130 and strongly contended that the
facts of the present case are squarely covered in favour of the assessee by
the decision of the Tribunal Chennai Bench.
10. The Ld. Departmental Representative strongly supported the
assessment order and the order of the First Appellate authority.
11. We have carefully perused the orders of the authorities below. In
the light of the decision of the Tribunal, Chennai Bench (supra), the issue
for consideration before us is whether the interest on housing loan be
part of cost of acquisition of fixed asset. Cost of acquisition has not been
defined in the Income Tax Act. To understand the components of the
cost we are taking shelter behind Accounting Standard-10 issued by the
Institute of Chartered Accountant of India, the highest Accounting body
of India created by an Act of Parliament.
Components of Cost
"Gross book value of a fixed asset is its historical cost or
other amount substituted for historical cost in the books of
5 ITA No. 4954/M/2012
account or financial statements. When this amount is shown
net of accumulated depreciation, it is termed as net book
value.
The cost of an item of fixed asset comprises its purchase
price, including import duties and other non-refundable
taxes or levies and any directly attributable cost of bringing
the asset to its working condition for its intended use, any
trade discounts and rebates are deducted in arriving at the
purchase price.
The cost of a fixed asset may undergo changes subsequent to
its acquisition or construction on account of exchange
fluctuations, price adjustments, changes in duties or similar
factors.
The expenditure incurred on start-up and commissioning of
the project, including the expenditure incurred on test runs
and experimental production, is usually capitalized as an
indirect element of the construction cost. If the interval
between the date a project is ready to commence commercial
production and the date at which commercial production
actually begins is prolonged, all expenses incurred during
this period are charged to the profit and loss statement."
11.1. A perusal of the above clearly shows that any directly attributable
cost of bringing the asset to its working condition for its intended use are
added to the purchase price for determining the cost of asset. In the
present case, as per the categorical finding of the Ld. CIT(A), the house
property was purchased in the financial year 2007-08. We had
specifically asked the Ld. Counsel to provide us the date of purchase,
which he failed. Going by the finding of the Ld. CIT(A), if the house
property was purchased in the financial year 2007-08, any payment of
interest on housing loan prior to the purchase of the house property would
definitely go towards the cost of acquisition as per the AS-10 (supra).
Any payment of interest subsequent to the said date, by any stretch of
imagination, cannot form the part of the cost of acquisition.
6 ITA No. 4954/M/2012
11.2. A simple reading of the decision of the Tribunal Chennai Bench
would also suggest that the Tribunal has considered the payment of
interest as part of the cost of acquisition. It is not clear whether the
interest upto the date of acquisition of the asset has to be considered or
even subsequent payment of interest would also go towards the cost of
acquisition. Therefore, principally we may agree with the findings of the
Tribunal, Chennai Bench but since facts are not clear, we do not find it
appropriate to make any observations on the said decision of the Tribunal.
Moreover, the Tribunal Chennai Bench has not considered AS-10 while
deciding the issue before it.
11.3. Even the facts of the case in our hand are also not complete as the
exact date of acquisition is not known, we are therefore left with no
choice but to restore the matter to the files of the AO. The assessee is
directed to furnish the exact date of purchase of house property. The
assessee is also directed to furnish the details of payment of interest upto
the date of the purchase of house property. The AO is directed to
consider the interest only upto the date of purchase of property as part of
the cost of acquisition.
12. With these directions, we dispose of the appeal which is treated as
allowed for statistical purpose.
Order pronounced in the open court on 18th March, 2015
Sd/- Sd/-
(D.MANMOHAN ) (N.K. BILLAIYA)
Ú¢ / VICE PRESIDENT / ACCOUNTANT MEMBER
Mumbai; Dated : 18th March, 2015
.../ RJ , Sr. PS .../ RJ , Sr. PS
7 ITA No. 4954/M/2012
/Copy of the Order forwarded to :
1. / The Appellant
2. × / The Respondent.
3. () / The CIT(A)-
4. / CIT
5. , ,
/ DR, ITAT, Mumbai
6. [ / Guard file.
/ BY ORDER,
× //True Copy//
/
(Dy./Asstt. Registrar)
, / ITAT, Mumbai
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