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Tax Publishers Long term Capital gains computation - claim of deductibility of interest on borrowed loan as indexed cost of improvement under section 48 there to *Facts:* Assessee had sold a property where he claimed the interest paid on pre-acquisition period of the loan as indexed cost of improvement which was disallowed by lower tax authorities. On higher appeal his plea was that he could not claim the internet in the pre-acquisition period as a deduction under section 24(b) thus was claimed as indexed cost of improvement while computing the capital gains - Held against the assessee that since the interest was only a funding mechanism no deduction of the same is available even if it pertains to pre-acquisition period. *Applied:* Tata Iron & Steel Co. Ltd. (1998) 231 ITR 285 (SC) : 1998 TaxPub(DT) 1068 (SC) ACIT, Circle 32(1), v. Sunil Batra, [I.T.A. No. 3644/Del/2010] Assessment year: 2007-08 *Dissented:* CIT v. Mithilesh Kumari (1973) 92 ITR 9 (Del) : 1973 TaxPub(DT) 0422 (Del-HC) *Ed. Note:* Finance Act 2023 w.e.f. 1-4-2024 has inserted a proviso in Section 48 that deductions claimed under section 24(b) or under Chapter VI cannot be claimed as cost of asset or cost of improvement. Whether this will apply to pre-acquisition cost of which 1/5th is allowable every year from year of completion but if the property is sold within 5 years leaving some interest unclaimed under section 24(b) that logically should be available under section 48 - but the topic is not free from debate. This decision has rejected the claim. *Case:* Rajesh Saluja v. DCIT 2024 TaxPub(DT) 809 (Del-Trib)

Tax Publishers

Long term Capital gains computation - claim of deductibility of interest on borrowed loan as indexed cost of improvement under section 48 there to

Facts:

Assessee had sold a property where he claimed the interest paid on pre-acquisition period of the loan as indexed cost of improvement which was disallowed by lower tax authorities. On higher appeal his plea was that he could not claim the internet in the pre-acquisition period as a deduction under section 24(b) thus was claimed as indexed cost of improvement while computing the capital gains -

Held against the assessee that since the interest was only a funding mechanism no deduction of the same is available even if it pertains to pre-acquisition period.

Applied:

Tata Iron & Steel Co. Ltd. (1998) 231 ITR 285 (SC) : 1998 TaxPub(DT) 1068 (SC)

ACIT, Circle 32(1), v. Sunil Batra, [I.T.A. No. 3644/Del/2010] Assessment year: 2007-08

Dissented:

CIT v. Mithilesh Kumari (1973) 92 ITR 9 (Del) : 1973 TaxPub(DT) 0422 (Del-HC)

Ed. Note: Finance Act 2023 w.e.f. 1-4-2024 has inserted a proviso in Section 48 that deductions claimed under section 24(b) or under Chapter VI cannot be claimed as cost of asset or cost of improvement. Whether this will apply to pre-acquisition cost of which 1/5th is allowable every year from year of completion but if the property is sold within 5 years leaving some interest unclaimed under section 24(b) that logically should be available under section 48 - but the topic is not free from debate. This decision has rejected the claim.

Case: Rajesh Saluja v. DCIT 2024 TaxPub(DT) 809 (Del-Trib)