Brijesh Poddar (Prop) Vs ITO (ITAT Agra)
The ITAT, Agra Bench held that interest paid on borrowed funds used exclusively for acquiring virtual digital assets (cryptocurrency) forms part of “cost of acquisition”, and is therefore deductible while computing short-term capital gains u/s 115BBH.
In this case, the assessee had borrowed funds and invested them entirely in cryptocurrency. The direct nexus between the loan and the investment was undisputed. Although the assessee had initially claimed the interest under IFOS u/s 57, he alternatively claimed that the interest should be capitalised as part of the acquisition cost. The AO and NFAC rejected the claim citing s.115BBH(2), which bars deductions other than cost of acquisition.
The Tribunal clarified that s.115BBH(2) allows deduction of cost of acquisition, and where borrowed funds are used to acquire the asset, interest till acquisition becomes part of such cost. Since the investment itself was funded by the loan, the interest of ₹5.74 lakh qualified as cost of acquisition and could not be disallowed.
Accordingly, the interest disallowance was deleted and the appeal was allowed in full
FULL TEXT OF THE ORDER OF ITAT AGRA
1. The appeal in ITA No. 528/AGR/2025 for AY 2023-24, arises out of the order of the ld National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 08.10.2025 against the order of assessment passed u/s 143(3) r.w.s. 144B of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 12.03.2025 by the Assessing Officer, ITO, Ward-4(3)(4), Hathras (hereinafter referred to as ‘ld. AO’).
