Neelam Sunil Soorma, Mumbai vs Assessee

सव ौी ड . मुमोहन, उपा य! एवं नरे ि कुमार %ब&लै(या, लेखा सदःय के सम!

BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND

SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER

आयकर अपील सं./I.T.A. No. 4954/Mum/2012 िनधा रण वष / Assessment Year : 2010-11 (िनधा Smt. Neelam Sunil The ACIT, Soorma, Central Circle-15 & 16, 11, Shiv Shakti, Plot No.30, Aayakar Bhavan, N.S. Road No. 10, Mumbai-400 020 Juhu Scheme, Juhu, Mumbai-400 049 ःथायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AEXPS 4136C (अपीलाथ0 /Appellant) .. (ू2यथ0 / Respondent) अपीलाथ0 ओर से/ Appellant by: Shri Nishit Gandhi ू2यथ0 क4 ओर से/Respondent by: Shri S.J. Singh

सुनवाई क4 तार ख / Date of Hearing :12.03.2015 घोषणा क4 तार ख /Date of Pronouncement :18.03.2015

आदे श / O R D E R

PER N.K. BILLAIYA, AM:

This appeal by the assessee is preferred against the order of the Ld. CIT(A)-39, Mumbai dt. 01.06.2012 pertaining to assessment year 2010-

11. 2 ITA No. 4954/M/2012

2. The sole grievance of the assessee is that the Ld. CIT(A) erred in not allowing interest paid for acquisition of flat of Rs. 18,20,679/- as part of the cost of flat sold.

3. It is the claim of the assessee that the Assessing Officer should be directed to allow interest paid for acquisition of flat as part of the Cost of Flat sold.

4. The assessee is in the business of Film production, Management of the entertainment/Event Shows and Display of Fireworks. The return for the year under consideration was selected for scrutiny assessment.

5,. During the course of the scrutiny assessment proceedings, inter alia, the AO noticed that the assessee has shown Short Term Capital loss of Rs. 16,81,989/-. The assessee was asked to explain the same. The assessee explained that the assessee has sold a property for Rs. 1,31,00,000/- for which the cost of acquisition is shown at Rs. 1,47,81,989/-. The cost of acquisition was further explained to be the purchase cost of the flat at Rs. 1,21,60,000/- + stamp duty of Rs. 7,70,610/- + registration charges Rs. 30,700/- totaling to Rs. 1,29,61,310/-.

5.1. The AO further observed that the stamp duty value of the said property was at Rs. 1,83,36,990/-. According to the AO, the assessee has not only shown higher cost of acquisition but has also under valued the sale price. The assessee was asked to explain why provisions of Sec. 50C of the Act should not be applied. In her reply, the assessee stated that the cost of acquisition includes interest on housing loan which is capitalized 3 ITA No. 4954/M/2012

by the assessee and the stamp duty value taken by the valuation authority is on the higher side.

6. The submissions made by the assessee did not find convincing. The AO was of the firm belief that the interest capitalized by the assessee does not form the component of purchase price. Moreover, the assessee has taken benefit of interest paid on housing loan from the income from house property separately. In so far as the Stamp duty value is concerned, the AO held that it has to be taken as per the provisions of Sec. 50C of the Act. The AO recomputed the capital gains as follows:

Sale price as per the Stamp Rs. 1,83,36,919/- Valuation Authority (As per agreement for sale dt.

26.6.2009) Less: Cost of acquisition 1,21,60,000/- (As per agreement for purchase dt. 29.9.2006) Stamp duty & Registration 8,01,310/- 1,29,61,310/- charges Short Term Capital Gain 53,75,609/-

7. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A). In so far as the stamp duty value of property is concerned, the assessee successfully convinced the Ld. CIT(A) to direct the AO to refer the matter to the DVO. This is not the issue before us.

7.1. In so far as the claim of interest on housing loan is concerned, the Ld. CIT(A) observed that the house property was purchased in the accounting year relevant to assessment year 2008-09 and the assessee has been claiming interest on housing loan as a deduction under the head 4 ITA No. 4954/M/2012

'Income from house property'. The Ld. CIT(A) was of the opinion that the interest expenditure cannot be considered as cost of improvement and confirmed the findings of the AO.

8. Aggrieved by this, the assessee is before us.

9. The Ld. Counsel for the assessee reiterated what has been stated before the lower authorities. In support of the claim, the Ld. Counsel relied upon the decision of the Tribunal, Chennai Bench in the case of ACIT Vs C. Ramabrahmam 57 SOT 130 and strongly contended that the facts of the present case are squarely covered in favour of the assessee by the decision of the Tribunal Chennai Bench.

10. The Ld. Departmental Representative strongly supported the assessment order and the order of the First Appellate authority.

11. We have carefully perused the orders of the authorities below. In the light of the decision of the Tribunal, Chennai Bench (supra), the issue for consideration before us is whether the interest on housing loan be part of cost of acquisition of fixed asset. Cost of acquisition has not been defined in the Income Tax Act. To understand the components of the cost we are taking shelter behind Accounting Standard-10 issued by the Institute of Chartered Accountant of India, the highest Accounting body of India created by an Act of Parliament.

Components of Cost

"Gross book value of a fixed asset is its historical cost or other amount substituted for historical cost in the books of 5 ITA No. 4954/M/2012

account or financial statements. When this amount is shown net of accumulated depreciation, it is termed as net book value.

The cost of an item of fixed asset comprises its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use, any trade discounts and rebates are deducted in arriving at the purchase price.

The cost of a fixed asset may undergo changes subsequent to its acquisition or construction on account of exchange fluctuations, price adjustments, changes in duties or similar factors.

The expenditure incurred on start-up and commissioning of the project, including the expenditure incurred on test runs and experimental production, is usually capitalized as an indirect element of the construction cost. If the interval between the date a project is ready to commence commercial production and the date at which commercial production actually begins is prolonged, all expenses incurred during this period are charged to the profit and loss statement."

11.1. A perusal of the above clearly shows that any directly attributable cost of bringing the asset to its working condition for its intended use are added to the purchase price for determining the cost of asset. In the present case, as per the categorical finding of the Ld. CIT(A), the house property was purchased in the financial year 2007-08. We had specifically asked the Ld. Counsel to provide us the date of purchase, which he failed. Going by the finding of the Ld. CIT(A), if the house property was purchased in the financial year 2007-08, any payment of interest on housing loan prior to the purchase of the house property would definitely go towards the cost of acquisition as per the AS-10 (supra). Any payment of interest subsequent to the said date, by any stretch of imagination, cannot form the part of the cost of acquisition.

6 ITA No. 4954/M/2012 11.2. A simple reading of the decision of the Tribunal Chennai Bench would also suggest that the Tribunal has considered the payment of interest as part of the cost of acquisition. It is not clear whether the interest upto the date of acquisition of the asset has to be considered or even subsequent payment of interest would also go towards the cost of acquisition. Therefore, principally we may agree with the findings of the Tribunal, Chennai Bench but since facts are not clear, we do not find it appropriate to make any observations on the said decision of the Tribunal. Moreover, the Tribunal Chennai Bench has not considered AS-10 while deciding the issue before it.

11.3. Even the facts of the case in our hand are also not complete as the exact date of acquisition is not known, we are therefore left with no choice but to restore the matter to the files of the AO. The assessee is directed to furnish the exact date of purchase of house property. The assessee is also directed to furnish the details of payment of interest upto the date of the purchase of house property. The AO is directed to consider the interest only upto the date of purchase of property as part of the cost of acquisition.

12. With these directions, we dispose of the appeal which is treated as allowed for statistical purpose.

Order pronounced in the open court on 18th March, 2015

Sd/- Sd/-

(D.MANMOHAN ) (N.K. BILLAIYA) उपा य! / VICE PRESIDENT लेखा सदःय / ACCOUNTANT MEMBER

मुंबई Mumbai; 8दनांक Dated : 18th March, 2015 व.िन.स./ RJ , Sr. PS व.िन.स./ RJ , Sr. PS 7 ITA No. 4954/M/2012

आदे श क4 ूितिल%प अमे%षत/Copy षत of the Order forwarded to :

1. अपीलाथ0 / The Appellant

2. ू2यथ0 / The Respondent.

3. आयकर आयु:(अपील) / The CIT(A)-

4. आयकर आयु: / CIT

5. %वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai

6. गाड फाईल / Guard file.

आदे शानुसार/ ार BY ORDER, स2या%पत ूित //True Copy// उप/सहायक उप सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण मुंबई / ITAT, Mumbai