Santanu Arun Nandi Vs ITO (ITAT Bangalore)
Bangalore ITAT: NRI Allowed Indexed Interest Cost on Housing Loan; Travel Expenses for Property Sale Sent Back for Verification
In a significant ruling for NRIs, the Bangalore ITAT held that interest paid on housing loan can form part of the cost of acquisition and be allowed with indexation, provided the same was not earlier claimed under the head “Income from House Property”.
The assessee, an NRI, had sold a residential property for ₹2.63 crore and while computing long-term capital gains claimed deductions towards travel expenses incurred for coming to India for the sale, one-time maintenance deposit, electricity/water deposits and indexed interest on housing loan. The AO rejected most of these claims and recomputed capital gains at a substantially higher figure.
A major procedural aspect in the case was that the appeal before the ITAT was delayed by 737 days because the assessee mistakenly filed appeal before the CIT(A) instead of directly approaching the Tribunal after DRP directions. The ITAT condoned the delay, observing that pursuing a wrong remedy under a bona fide mistake by a non-resident constituted sufficient cause.
On merits, the Tribunal held that the one-time maintenance deposit paid to the builder and the electricity/water deposits were intrinsically linked to acquisition of the flat and therefore constituted part of the cost of acquisition eligible for indexation.
Further, relying on the Karnataka High Court ruling in Hariram Hotels Pvt. Ltd., the ITAT held that the interest paid on housing loan was also allowable as part of cost of acquisition since the assessee demonstrated that no deduction for such interest had been claimed earlier u/s 24(b). The Tribunal specifically directed that indexed benefit be granted on such interest cost as well.
However, regarding foreign travel, hotel stay and related expenses claimed as expenditure incurred wholly and exclusively in connection with transfer u/s 48, the Tribunal noted that the assessee had stayed in India for 17 days and had also travelled to multiple cities. Since the nexus with the actual transfer required closer examination, the issue was restored back to the AO for fresh verification.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal is filed by SANTANU ARUN NANDI [the Assessee / Appellant] against the order passed by the ITO, WARD INTL. Taxation 1(2), Bengaluru [the ld. AO] dated 16-Jun-2023 for the Assessment Year 2020-21 wherein the total income of the assessee as per return of income of Rs.37,09,400 is assessed at Rs.76,00,744.
