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2023 (11) TMI 701 - AT - Income TaxScope of Limited scrutiny under CASS - Capital gain computation - deduction u/s 48(ii) from the Long Term Capital Gains in respect of the indexed cost of interest paid for acquisition of the house property sold by the assessee - whether disallowance of deduction u/s 48(ii) from LTCG in respect of the indexed cost of interest paid for the acquisition of the house property sold by the assessee, made by AO by travelling beyond the issue for which this case was selected for limited scrutiny under CASS is without jurisdiction - HELD THAT:- The assessment order is silent as to the allowability or otherwise as to why this indexed cost of interest expenditure on loans borrowed cannot be allowed as deduction. However, the appellant had claimed deduction towards interest expenditure while computing the capital gains on sale of said two flats. The NFAC placing reliance on the decision of Tata Iron & Steel Co. [1997 (12) TMI 5 - SUPREME COURT] had confirmed the disallowance. The undisputed fact is that the two flats purchased by the appellant company were held as capital assets. Therefore, the income from these two flats is assessable under the head “income from house property” as per the provisions of section 22 of the Act. The provisions of section 24 specifically provide that where the property had been acquired with borrowed capital, the interest expenditure incurred on such borrowed capital is allowable as deduction. The expenditure which is allowable u/s 24 cannot be capitalized, claimed as cost of acquisition. It is settled position of law that when the Statute provides for deduction in particular manner i.e. the AO is bound to compute the income in the manner prescribed under the Statute not in any other manner. Therefore, the approach adopted by the Assessing Officer is totally in accordance with provisions of the Income Tax Act and requires no interference. Case was selected under CASS for following reasons like Sale consideration of the property in ITR is less than sale consideration of property reported in ITR and Sale of property reported in form 26QB. The cost of acquisition of property also forms integral part of the sale of property. Therefore, it cannot be said that the Assessing Officer had travelled beyond the items for which the case was selected for scrutiny assessment. Accordingly, the grounds of appeal/additional grounds of appeal filed by the assessee stand dismissed.
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