Taxpayers entitled for deduction on capital gains too
Chennai- Income-Tax Appellate Tribunal (ITAT) of Chennai affirmed that the interest on home loans will continue to be out of the tax net despite the property gets sold later on.
The interest paid on loans is surely an expenditure that should be taken into account while computing the income from housing property as well as in computing capital gains arising from sale of the same property, ordered the Tribunal on October 31.
In a recent case, a taxpayer, C Ramabrahmam had borrowed money for buying property and claimed deduction for the interest paid for the borrowed funds, while computing income from house property. And later, when the house was sold, the taxpayer treated the interest paid on loan as “cost of acquisition” for the purpose of computing capital gains and again claimed deduction.
But the assessing officer refused to accept the claim on the ground that interest has already been allowed. Though the first appellate authority, Commissioner (Appeal), allowed the claim of the taxpayer, the income-tax department moved the ITAT, which is the second appellate authority for deciding tax disputes.
The Tribunal declined the appeal, holding that deduction and computation of capital gains are covered under different heads of income wherein one section deals with house property while the other section deals with capital gains. It insisted that both these provisions are altogether different, so the taxpayer is entitled to claim deduction of interest paid on the loans while computing capital gains too.
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