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2018 (3) TMI 733

e as reasonable cause for not making the investment as required by the Act qualifying for exemption from capital gain - Held that:- The assessee has not invested either in flat or construction of accommodation or deposited the sum of ₹ 50 lacs in the designated capital gain account, instead it has deposited the same in Andhra Bank not qualifying for capital gain. The. We find that it is trite law that the assessee can get relief only within the four corners of law. The assessee having not complied with the provisions of law by making the requisite investment in residential accommodation or investment in designated capital gain account cannot claim relief from capital gain to the extent of ₹ 50 lacs deposited in Andhra Bank account which is not qualifying for capital gain exemption. - Treatment of interest under housing loan as cost of improvement and application of cost inflation index thereupon - Deductions from income from house property - Held that:- The interest on housing loan has not been mandated to be allowed as deduction otherwise than the prescription of law prescribed as above. Furthermore, we find that the CIT(Appeals) in his appellate order has referre .....

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pellant. Asstt Yr. Hsg loan Intt Indexed cost 2005-06 51,670 x 711/480 = 76,536 2006-07 3,06,387 x 711/497 = 4,38,312 2007-08 2,99,345 x 711/519 = 4,10,085 Total 6,57,402 9,24,933 The Learned A.O. has further erred in declining to deduct indexed cost of ₹ 9,24,933 on Interest factor from L.T.Cap Gain for which assessee relied upon the latest ITAT Chennai judgment dt 31/10/2012 in the case of Assistant CIT Business Circle-IV V/S Shri C Ramabrahamam. Gist of this Judgment is Attached as annexure-A. for immediate reference. 5. All the above grounds are without prejudice to each other. 3. From the grounds of appeal above it is clear that that effectively the assessee is making two effective issues which are as under: 1. Issue of deposit of ₹ 50 lakh with Andhra bank to be treated as qualifying for deposit under capital gains scheme. 2. Treatment of interest under housing loan as cost of improvement and application of cost inflation index thereupon. 4. Brief facts of the case are as under: The assessee had sold a flat on 25.11.2010 for an amount of ₹ 2,57,00,000/- and had computed long term capital gain as under: Amount(Rs.) Amount(Rs.) Sale Prize of flat 2,57,00,000/- .....

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n fee-31600 1156553 74550 30000 149100 319300 31600 551 96198 38711 192395 00 412019 40776 2008-9 Loan Interest to ICICI Bank-283521 /furniture cost paid to wood Plaza- 679500 1176474 _________ 679500 582 00 830110 2009-10 Loan Interest to ICICI Bank-274644 Air conditioning cost + Labour-195387 528784 195387 632 00 219810 2010-11 Loan Interest to ICICI Bank-188772 188772 - 711 00 Total 14377836 12145538 (Highlighted amounts not allowed by AO) Sale Prize of flat 2,57,00,000/- Indexed cost of fiat including stamp duty and registration and indexed cost of improvement as tabulated above in para 6 1,21,45,538/- Long Term Capital Gain 1,35,54,462/- From the table above it is seen that the Assessing Officer computed Capital Gains at ₹ 1,35,54,462/- whereas the assessee had computed the same at ₹ 99,14,319/-, thus making an addition of ₹ 36,40,143/-. 5. Further, the Assessing Officer allowed the claim of the appellant for the amount of ₹ 50,00,000/- deposited in SBl in Capital Gain account scheme. However the AO disallowed deduction of ₹ 50,00,000 deposited in Andhra Bank, which was not a capital gain account schemewhich is the second Ground of appeal. 6. Agai .....

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originally. It was further stated that the deposit value (of money in SBI capital gain scheme and Andhra Bank) with interest amounted to ₹ 1,22,06,157 so capital gain is not taxable in year under consideration. However as the assessee could not purchase property in stipulated period of 3 years, hence capital Gain of 1,21,96,700 will be taxable in A.Y. 2014-15. 6.3. I have gone through the submission of the appellant and the assessment order. The A.O is of the view that as the expenditure is incurred after the asset is acquired, therefore it cannot be a part of cost of acquisition. Secondly interest paid on housing loan cannot be a part of cost of improvement as it is not a capital expenditure. Thirdly as the assessee has claimed the interest u/s 24(b) while computing Income from house property, the same cannot be allowed while computing Capital Gains as it amount to double deduction. 8. Thereafter, the ld. Commissioner of Income Tax (Appeals) elaborately considered the provisions of law and the case laws on the subject. The ld. Commissioner of Income Tax (Appeals) concluded as under: 6.6 The judgments discussed above lay down following principles: a). In view of judgements o .....

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sed by him for the purchase or construction of the new asset (ii). before the date of furnishing the return of income under sect/on 139, (Hi), shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-sect/on (1) of section 139] (iv).in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,- (i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the .....

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ited ₹ 50 lacs as normal Fixed deposit with Andhra Bank as both these banks are Notified Banks to accept such deposits of LT Cap. Gain. It was assessee's intention to invest minimum ₹ 1,00,00,000 (bne crore) in new asset within the stipulated period of TWO Years as there was strong market prediction that the reality prices are going to crash by 30 to 35%. Undersigned could not invest the amount in new flat within 2 years as the prices of the flats in Thane particularly in Hiranandani Estate / Hiranandani Meadows continued with increasing trend even till date. Deposits with both the Banks were renewed and continued beyond 2 years as per the deposit receipts/ Bank certificates produced before the Learned Assessing officer during the course of proceedings. Maturity value of deposits with these banks increased from ₹ 1,00,00,000 to ₹ 1,22,06,157 by June/ Oct 2013 as under- State Bank of India- 2 receipts maturity amt in Oct 2013 62,30,698.Ann-A Andhra Bank - 3 receipts maturity amt in Jun 2013 59.7,5.459-Ann-B Total 1,22,06,157 -Assessing officer in his order dated 24/03/2014 computed net taxable LT capital gain at ₹ 85,54,462 after allowing deduction .....

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e four corners of law. The assessee having not complied with the provisions of law by making the requisite investment in residential accommodation or investment in designated capital gain account cannot claim relief from capital gain to the extent of ₹ 50 lacs deposited in Andhra Bank account which is not qualifying for capital gain exemption. Hence, in our considered opinion, the order of ld. Commissioner of Income Tax (Appeals) is reasonable one and does not need any inference on our part. 13. The assessee has made a further claim of seeking the interest on housing loan as cost of improvement and it also claims benefit of indexation thereon. In this regard, we note that the assessee has also claimed some part of the interest as deduction from interest from house property. The provision for treatment of interest on borrowed capital is provided in section 24(b) of the I. T. Act which reads as under: Deductions from income from house property. 24. Income chargeable under the head "Income from house property" shall be computed after making the following deductions, namely:- (b) where the property has been acquired, constructed, repaired, renewed or reconstructed with .....

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