Shree Bal Properties & Finance P. Ltd Vs PCIT (ITAT Mumbai)
Admittedly, the assessee while computing its income in the previous years under the head ‘Income from House Property‘ had claimed deduction u/s 24(b) of the interest paid on loan raised from ‘Janalaxmi Co-op Bank Ltd’, which funds are stated to have been utilized in construction of the property in question. In our considered view, there is substance in the view taken by the CIT(A) that now when the interest expenditure was allowed as a deduction to the assessee while computing its income under the head “Income from house property”, the same could not have thereafter been allowed as a deduction by allowing it to be capitalized as a part of the cost of acquisition while computing its income under the head “capital gains” at the time of sale of the property. In fact, a view to the contrary would lead to allowing of a deduction to the assessee twice.
Our aforesaid view is fortified by the judgment of the Hon’ble High Court of Karnataka in the case of CIT Vs. Maithreyi Pai [1985] 152 ITR 247 (Kar), wherein it was observed as under:
“The interest paid on borrowings for the acquisition of a capital asset must fall for deduction under s. 48. But, if the same sum is already the subject-matter of deduction under other heads like those under s. 57, we cannot understand how it could find a place again for the purpose of computation under s. 48. No assessee under the scheme of the IT Act could be allowed deduction of the same amount twice over. We are firmly of the opinion that if an amount is already allowed under s. 57 while computing the income of the assessee the same cannot be allowed as deduction for the purpose of computing the “capital gains” under s. 48.”
As such, now when the assessee in the case before us had claimed deduction of the interest paid to “Janalaxmi Co-op Bank Ltd” while computing its income for the previous years under the head “Income from House Property”, therefore, it would not be eligible to once again claim deduction of such interest expenditure in the garb of cost of acquisition of the property while computing the income under the head “Capital gains” at the time of sale of the property in question. Accordingly, finding no infirmity in the view taken up the CIT(A) in context of the issue under consideration, we uphold the same.
FULL TEXT OF THE ITAT JUDGEMENT
The present appeals filed by the assessee are directed against the respective orders passed by the Pr. Commissioner of Income-tax-2, Mumbai [Pr. CIT] under Sec. 263 of the Income-tax Act, 1961 [for short ‘Act’], dated 26.03.2019 AND the order passed by the CIT(Appeals)-6, Mumbai, dated 08.11.2017, both of which arises from the assessment framed by the A.O u/s 143(3) of the Act, dated 28.12.2016. As the issues involved in the captioned appeals are inextricably interlinked or in fact interwoven, therefore, the same are being taken up and disposed off together by way a common order. We shall first advert to the appeal filed by the asssessee against the order passed by the Pr. CIT u/s 263 of the Act, wherein the impugned order has been assailed on the following grounds of appeal before us :
“1. On the facts and the circumstances of the case and in law, the Learned Commissioner of Income-tax -2, Mumbai (hereinafter said “the CIT”) erred in passing order under section 263 of the Income-tax Act, 1961 {Act}, dated 26th March, 2019 (hereinafter referred to as the “impugned order”) despite the fact that the CIT was appraised of the fact that an appeal against the order under section 143(3) of the Act passed by the Assessing Officer is pending before the Hon’ble Income-tax Appellate Tribunal, Mumbai and hence CIT cannot assume jurisdiction under section 263 of the Act to pass the impugned order. Hence the impugned order is bad in law and may kindly be set aside/annulled.
2. The ld. CIT erred in not appreciating that in the present case the original assessment order was passed after considering all the details and the documents furnished by the appellant before the Assessing officer and hence the CIT was not justified in exercising the suo motto power of revision under the provisions of section 263 of the Income-tax Act, 1961 (“the Act”).
3. The Learned CIT further erred in not appreciating that in the present case the Assessing officer had applied his mind and arrived at the conclusion to disallow the claim of Rs. 1,10,52,418/- and adding the same by holding that the Appellant has claimed the said expenditure of Rs. 1,10,52,418/- by claiming twice: once by claiming benefit under section 24(b) of the Act and again by claiming indexation thereof vide calculating capital gain. Thus, it was not a case of lack of enquiry thereby non-application of mind on the part of the Assessing Officer. No action under section 263 was called for by the CIT on having a different opinion on the subject matter of the present case, the same would not confer revisional jurisdiction on him under the provisions of Section 263 of the Act.
4. The CIT erred in passing the impugned order under section 263 of the Act, in as much as there is nothing erroneous or prejudicial to the interest of the revenue which has been pointed out in the impugned order. The impugned order is therefore liable to be set aside.
5. The appellant craves leave to alter, amend, and/o substitute the aforesaid grounds of appeal at the time of hearing.”
2. Briefly stated, the assessee company which is engaged in the business of running a business centre and building construction had e-filed its return of income for A.Y 2014-15 on 30.11.2014, declaring a total income of Rs. 51,90,270/- under the normal provisions and ‘book profit’ u/s 115JB at Rs. 3,06,84,301/-. The return of income filed by the assessee was processed as such u/s 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s 143(2) of the Act.
3. During the course of the assessment proceedings it was observed by the A.O that the assessee had sold its Office premises (I.T Building) located at Pune for a consideration of Rs. 4,55,00,000/-, against which it had worked out the ‘Long Term Capital Gain’ (for short ‘LTCG’) at Rs. 62,75,410/-. On a perusal of the working of the LTCG, it was observed by the A.O that the assessee had claimed deduction for cost of acquisition/improvement, as under:
