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Interest paid on borrowing for acquiring house deductible u/s 24(b) & 48

In a very interesting and well written judgement the Income Tax Appellate Tribunal held that the same expense can be deducted under two heads of taxation as they are different.

The assessee borrowed funds for purchasing a house. The interest paid on the said loan was claimed as a deduction u/s 24(b). When the house was sold, the interest paid on the said loan was treated as “cost of acquisition” and claimed as a deduction u/s 48 in computing the capital gains. The AO held that as the interest had been allowed as a deduction u/s 24(b), it could not allowed again in computing capital gains. The CIT(A) allowed the claim. On appeal by the department to the Tribunal, HELD dismissing the appeal:

Deduction u/s 24(b) and computation of capital gains u/s 48 are altogether covered by different heads of income i.e., income from ‘house property’ and ‘capital gains’. Neither of them excludes the other. A deduction u/s 24(b) is claimed when the assessee computes income from ‘house property’, whereas, the cost of the same asset is taken into consideration when it is sold and capital gains are computed under section 48. There is no doubt that the interest in question is an expenditure in acquiring the asset. Since both provisions are altogether different, the assessee is entitled to include the interest at the time of computing capital gains u/s 48.

 Comment:

 While perhaps the IT Act has not specifically stopped seeking deduction of the same amount twice but somehow this decision of the Tribunal appears to be somewhat unusual. 

I.T.A. No.943/Mds/2012

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