Bani Broto Banerjee Vs CIT (ITAT Kolkata)
ITAT Kolkata held that interest expenditure incurred on loans taken for acquiring property is allowable as deduction under section 48. However, from Assessment Year 2024-2025, due to amendment in provisions, such expenditure will not be allowed as deduction.
Facts-On perusal of the record, it revealed to the ld. Assessing Officer that the assessee was holding 99% share of Rainey Park Limited. The Guest House/Hotel was being run by the assessee and ultimately on account of losses faced by him, he has sold the property. The ld. Assessing Officer has worked out the capital gain assessable in his hand. He has claimed two amounts in the long-term capital gain i.e. written down value of the cost of furniture aggregating to Rs.1,30,23,709/- and interest expenditure of Rs.1,90,78,228/-. AO disallowed both these claims to the assessee.
CIT(A) partly allowed the appeal. Being aggrieved, the present appeal on the sole dispute that whether interest expenditure incurred by the assessee on the loans taken by him for acquiring this property is admissible to the assessee or not.
Conclusion- Significantly, the Finance Bill, 2023 has proposed certain amendment in this regard. On a reading of the Finance Bill, it appears that as per the existing position of law, some assessee claims deduction towards interest paid on borrowed capital utilized for acquisition of the property under Section 24(b) of the Act. The same amount of interest is also being claimed under Section 48 of the Act as part of cost of acquisition. In order to prevent double deduction, the Finance Bill, 2023 has proposed to insert a proviso after clause (ii) of Section 48 so as to provide that cost of acquisition or the cost of improvement shall not include the amount of interest claimed under Section 24 of the Act. The amendment is proposed to take effect from Assessment Year 2024- 25 prospectively. Thus, the proposed amendment in Section 48 to prevent double taxation makes the existing position of law loud and clear. As a corollary, as per the existing position, the assessee is entitled to claim interest on borrowed capital used for acquisition of property as part of its cost of acquisition for the purposes of determination of capital gains.
