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LTCG house property

Vaishnavi M (3 Points)

08 December 2024

sir
whether the amount of interest paid on borrowed capital on acquisition will come under Cost of Acquisition.
Any case laws are there to substantiate the issue.

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Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (5684 Points)
Replied 08 December 2024

The amount of interest paid on borrowed capital for acquisition can indeed be considered as part of the Cost of Acquisition.

This is supported by various case laws. -

In the case of CIT Vs. K. Raja Gopala Rao (2001 252 ITR 459 Mad), the court ruled that interest paid on borrowed capital for acquiring a property is considered part of the actual cost of acquisition.

Similarly, in the case of Trishul Investments Ltd. (305 ITR 434 Madras), the Madras High Court held that interest paid for acquiring shares would partake the character of cost of shares and can be capitalized along with the cost of acquisition for computing capital gains.

Another case, ACIT vs C. Ramabrahmam (ITA No.943/Mds/2012), also supports this view, stating that deduction under section 24(b) and computation of capital gains under section 48 are covered under different heads of income, and thus, interest paid on borrowed capital can be claimed as part of the cost of acquisition

However, it's essential to note that there are conflicting judicial views on this matter. For instance, the Bangalore Tribunal in the case of Captain BL Lingaraju vs ACIT (ITA No. 906/Bang/2014) held that interest paid on borrowed capital cannot be claimed as part of the cost of acquisition if it has already been allowed as a deduction under other heads.

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Vaishnavi M (3 Points)
Replied 11 December 2024

Thank you sir

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