ITAT says home loan interest, builder deposits count in property cost

Electricity and water deposits paid to the builder received the same treatment. The tribunal said those too formed part of the acquisition cost and could be indexed.

On home loan interest, the tribunal relied on the Karnataka High Court's ruling in CIT v. Sri Hariram Hotels Pvt. Ltd. It held that interest on a housing loan could be added to the cost of acquisition, provided the taxpayer had not already claimed that interest as a deduction under the head "Income from House Property." Nandi showed copies of earlier returns to prove he had not taken that deduction.

The tribunal stopped short of allowing foreign travel expenses incurred while selling the property. Nandi argued that travel from the U.S. to India was solely for completing the sale and cited an earlier ITAT Hyderabad ruling. The tax department had disallowed the claim on the ground that the expense was not "wholly and exclusively" connected to the transfer. Instead of deciding the issue, the ITAT sent it back to the Assessing Officer to verify whether the travel was directly linked to the sale.

The appeal was partly allowed. For taxpayers, the ruling clarifies that certain acquisition-related costs can be included in the indexed cost, documentation must prove the expenses are directly connected to acquiring or transferring the asset.