Bani Broto Banerjee Vs CIT (Appeals) (ITAT Kolkata)
The ITAT Kolkata considered whether interest expenditure of ₹1,90,78,228 incurred on loans taken for acquiring a property could be allowed while computing long-term capital gains under Section 48 of the Income-tax Act. The Assessing Officer had disallowed the claim, and the CIT(A) upheld the disallowance on the ground that the interest should have been claimed against house property income under Section 57 and was not admissible under Section 48.
The Tribunal noted that the only dispute before it concerned the allowability of interest expenditure in the computation of capital gains. The assessee relied on decisions of the Chennai Bench in ACIT v. C. Ramabrahmam and the Delhi Bench in ACIT v. Smt. Sadhna Aggarwal, wherein it was held that deduction under Section 24(b) and computation of capital gains under Section 48 operate under different heads of income and that interest paid on borrowed funds used to acquire a property forms part of its cost of acquisition.
The Tribunal observed that the Delhi Bench had also taken note of the amendment introduced in Section 48 by the Finance Bill, 2023, effective from Assessment Year 2024-25, providing that interest claimed under Section 24 would not form part of the cost of acquisition thereafter. It held that the amendment applied prospectively and that, for the assessment year under consideration, the issue was squarely covered in favour of the assessee by the coordinate bench decision.
