I claimed housing loan interest under s.24(b) every year. When I sell, can the same interest also go into the cost of acquisition?
Yes, on this Tribunal view - but the point is contested. The Chennai Bench held that a deduction under s.24(b) and the computation of capital gains under s.48 are covered by different heads of income and neither excludes the other, so interest already allowed against house property income may still be included in the cost when capital gains are computed. The Karnataka High Court has taken the opposite view.
Decided by the ITAT (ITAT Chennai Bench 'C' - Dr. O.K. Narayanan, Vice-President and S.S. Godara, Judicial Member (order authored by S.S. Godara)) on 2012-10-31, reported as [2012] 27 taxmann.com 104 (Chennai - Trib.) / [2013] 57 SOT 130 (Chennai - Trib.); IT Appeal No. 943 (Mds.) of 2012, assessment year 2007-08, order dated 31 October 2012. It bears on section 24, section 24(b), section 48, section 143(3) of the Income Tax Act 1961, in House Property, Capital Gains and Deductions & Disallowances matters.
On a long-held property the interest can exceed the purchase price, so the answer changes the gain materially. The department's counter is not a technical one: it is that the Act does not allow the same sum to be deducted twice, and the Karnataka High Court in CIT v. Maithreyi Pai has said so. Anyone claiming both should know they are on the wrong side of the only High Court authority reported on the point.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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For assessment year 2007-08 the assessee, an individual, had bought a house property at T. Nagar, Chennai on 20 January 2003 for Rs 32.64 lakh, paying a further Rs 4 lakh of registration cost and Rs 39,926 of improvement, a net cost of Rs 37,03,926. He had borrowed for the purchase and had claimed the interest under s.24(b) in assessment years 2004-05 to 2006-07. He sold the property on 20 April 2006 for Rs 26 lakh - a holding period of a little over three years, so the gain fell to be computed as a short term capital gain - and in his return added Rs 4,82,042 of that interest to the cost. The Assessing Officer added the interest back, holding that the same amount could not be taken into account under s.48 once it had been deducted under s.24(b). A second addition of Rs 9,94,542 was made in the same assessment, disallowing interest and brokerage debited against income declared under other sources, the officer holding that a single loan to one debtor was not a business activity. The Commissioner (Appeals) deleted both additions and the Revenue appealed against both.
On the interest issue the Revenue's appeal failed: a deduction under s.24(b) and the computation of capital gains under s.48 fall under different heads of income and neither provision excludes the operation of the other, so the assessee was entitled to include the interest in the cost when computing capital gains under s.48, and the deletion of the Rs 4,82,042 addition was upheld (para 8). But the appeal was not dismissed. The second issue - the Rs 9,94,542 addition under income from other sources - was restored to the file of the Commissioner (Appeals), the Tribunal holding that he had decided the point on the evidence of the loan transactions without addressing the legal question whether a salaried assessee's single loan transaction can be called a business activity, and directing him to decide that afresh after hearing the assessee. The order records the result as the Revenue's appeal being partly accepted for statistical purposes (paras 9 and 10).
The Tribunal set out clause (b) of s.24 and clauses (i) and (ii) of s.48 and reasoned from their placement. Section 24(b) allows the interest on capital borrowed for acquiring, constructing, repairing, renewing or reconstructing the property, and is claimed while the assessee declares income under the head house property; s.48 takes the cost of the same asset into account when it is sold and the gain is computed under the head capital gains. The two provisions are covered by different heads of income and, on a reading of both, neither excludes the operation of the other. The Tribunal added that it had not the slightest doubt that the interest was an expenditure in acquiring the asset, so the assessee was entitled to include it in the s.48 computation (para 8). On the second issue it held that the legal question - whether the transaction amounted to a business - had escaped the Commissioner (Appeals) altogether, and sent it back for that reason rather than deciding it (para 9).
After perusing the above said provisions, we are of the opinion that deduction under section 24(b) and computation of capital gains under section 48 of the "Act" are altogether covered by different heads of income i.e., income from 'house property' and 'capital gains'.
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Handle my notice → Ask a CA on WhatsAppYes, on this Tribunal view - but the point is contested. The Chennai Bench held that a deduction under s.24(b) and the computation of capital gains under s.48 are covered by different heads of income and neither excludes the other, so interest already allowed against house property income may still be included in the cost when capital gains are computed. The Karnataka High Court has taken the opposite view. This was decided by the ITAT (ITAT Chennai Bench 'C' - Dr. O.K. Narayanan, Vice-President and S.S. Godara, Judicial Member (order authored by S.S. Godara)) and bears on section 24, section 24(b), section 48, section 143(3) of the Income Tax Act 1961. It is reported as [2012] 27 taxmann.com 104 (Chennai - Trib.) / [2013] 57 SOT 130 (Chennai - Trib.); IT Appeal No. 943 (Mds.) of 2012, assessment year 2007-08, order dated 31 October 2012. On a long-held property the interest can exceed the purchase price, so the answer changes the gain materially. The department's counter is not a technical one: it is that the Act does not allow the same sum to be deducted twice, and the Karnataka High Court in CIT v. Maithreyi Pai has said so. Anyone claiming both should know they are on the wrong side of the only High Court authority reported on the point. If it applies to you, the first step is this: Keep the lender's year-wise interest statements from the first year of the loan - the claim under s.48 needs the whole series, not the year of sale.
For assessment year 2007-08 the assessee, an individual, had bought a house property at T. Nagar, Chennai on 20 January 2003 for Rs 32.64 lakh, paying a further Rs 4 lakh of registration cost and Rs 39,926 of improvement, a net cost of Rs 37,03,926. He had borrowed for the purchase and had claimed the interest under s.24(b) in assessment years 2004-05 to 2006-07. He sold the property on 20 April 2006 for Rs 26 lakh - a holding period of a little over three years, so the gain fell to be computed as a short term capital gain - and in his return added Rs 4,82,042 of that interest to the cost. The Assessing Officer added the interest back, holding that the same amount could not be taken into account under s.48 once it had been deducted under s.24(b). A second addition of Rs 9,94,542 was made in the same assessment, disallowing interest and brokerage debited against income declared under other sources, the officer holding that a single loan to one debtor was not a business activity. The Commissioner (Appeals) deleted both additions and the Revenue appealed against both. The matter was decided on 2012-10-31 by the ITAT (ITAT Chennai Bench 'C' - Dr. O.K. Narayanan, Vice-President and S.S. Godara, Judicial Member (order authored by S.S. Godara)). On those facts the ITAT held as follows. On the interest issue the Revenue's appeal failed: a deduction under s.24(b) and the computation of capital gains under s.48 fall under different heads of income and neither provision excludes the operation of the other, so the assessee was entitled to include the interest in the cost when computing capital gains under s.48, and the deletion of the Rs 4,82,042 addition was upheld (para 8). But the appeal was not dismissed. The second issue - the Rs 9,94,542 addition under income from other sources - was restored to the file of the Commissioner (Appeals), the Tribunal holding that he had decided the point on the evidence of the loan transactions without addressing the legal question whether a salaried assessee's single loan transaction can be called a business activity, and directing him to decide that afresh after hearing the assessee. The order records the result as the Revenue's appeal being partly accepted for statistical purposes (paras 9 and 10).
The Tribunal set out clause (b) of s.24 and clauses (i) and (ii) of s.48 and reasoned from their placement. Section 24(b) allows the interest on capital borrowed for acquiring, constructing, repairing, renewing or reconstructing the property, and is claimed while the assessee declares income under the head house property; s.48 takes the cost of the same asset into account when it is sold and the gain is computed under the head capital gains. The two provisions are covered by different heads of income and, on a reading of both, neither excludes the operation of the other. The Tribunal added that it had not the slightest doubt that the interest was an expenditure in acquiring the asset, so the assessee was entitled to include it in the s.48 computation (para 8). On the second issue it held that the legal question - whether the transaction amounted to a business - had escaped the Commissioner (Appeals) altogether, and sent it back for that reason rather than deciding it (para 9). In the words reproduced by the source cited on this page: "After perusing the above said provisions, we are of the opinion that deduction under section 24(b) and computation of capital gains under section 48 of the "Act" are altogether covered by different heads of income i.e., income from 'house property' and 'capital gains'."
It was decided by the ITAT on 2012-10-31 and is reported as [2012] 27 taxmann.com 104 (Chennai - Trib.) / [2013] 57 SOT 130 (Chennai - Trib.); IT Appeal No. 943 (Mds.) of 2012, assessment year 2007-08, order dated 31 October 2012. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 24, section 24(b), section 48, section 143(3), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. On the interest issue the Revenue's appeal failed: a deduction under s.24(b) and the computation of capital gains under s.48 fall under different heads of income and neither provision excludes the operation of the other, so the assessee was entitled to include the interest in the cost when computing capital gains under s.48, and the deletion of the Rs 4,82,042 addition was upheld (para 8). But the appeal was not dismissed. The second issue - the Rs 9,94,542 addition under income from other sources - was restored to the file of the Commissioner (Appeals), the Tribunal holding that he had decided the point on the evidence of the loan transactions without addressing the legal question whether a salaried assessee's single loan transaction can be called a business activity, and directing him to decide that afresh after hearing the assessee. The order records the result as the Revenue's appeal being partly accepted for statistical purposes (paras 9 and 10). It arises in House Property, Capital Gains and Deductions & Disallowances matters, on section 24, section 24(b), section 48, section 143(3) of the Income Tax Act 1961, and was decided by ITAT Chennai Bench 'C' - Dr. O.K. Narayanan, Vice-President and S.S. Godara, Judicial Member (order authored by S.S. Godara). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Make the claim in the return and disclose it, rather than leaving the department to find it, so the argument is on the merits and not on concealment. Check whether the Karnataka High Court line binds your assessment - CIT v. Maithreyi Pai (1985) 152 ITR 247 and CIT v. Sri Hariram Hotels (P) Ltd (2010) 229 CTR 455 (Kar) are the other way. Where the interest was never claimed under s.24(b) at all, the s.48 claim is materially stronger and should be run on its own footing.
Superseded by amendment. The provision has moved since this 2012 order. Section 48 of the Income-tax Act 1961, read on the Acts module, now contains the words that the cost of acquisition or the cost of improvement 'shall not include the deductions claimed on the amount of interest' under clause (b) of section 24 or under the provisions of Chapter VIA, inserted by the Finance Act 2023 with effect from 1 April 2024, that is from assessment year 2024-25. The Tribunal's reasoning - that section 24(b) and section 48 sit under different heads and neither excludes the other - therefore survives only for assessment years up to 2023-24, which is where the older Tribunal line and the contrary Karnataka line still matter. Later treatment was checked by a citation search on 27 taxmann.com 104, which returns fourteen documents: three later Tribunal decisions - Gayatri Maheshwari v. ITO [2017] 88 taxmann.com 757 (Jodhpur) (UO), in favour of the assessee, ITO v. Janus Investments [2015] 53 taxmann.com 310 (Mumbai), in favour of revenue, and HGP Community (P.) Ltd. v. ITO [2018] 91 taxmann.com 464 (Mumbai), matter remanded - and the rest articles and commentary. None was read, so none is relied on here as following or doubting this order. Nothing was found showing the Supreme Court resolved the pre-amendment conflict. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order has now been read, and three things in the earlier version were wrong or missing. The date is 31 October 2012, as the order itself states, so the 20 November 2012 in one digest is not the date of the order. The Bench was two members, Dr. O.K. Narayanan, Vice-President, sitting with S.S. Godara, Judicial Member. And the disposal was not a dismissal: the Revenue's appeal was partly accepted for statistical purposes, because a second and unrelated addition of Rs 9,94,542 under income from other sources was restored to the file of the Commissioner (Appeals) for a finding on whether a salaried assessee's single loan transaction is a business activity - a point he had never addressed. On the point this entry is about, the gain was a short term capital gain: the property was bought in January 2003 and sold in April 2006 at a loss against cost, so no question of indexing the interest component arose and none was decided. This states the Tribunal's view only; it is not the settled position, and one later Mumbai decision citing it went in favour of the revenue. The order does not say whether the property was let out or self-occupied in the years the s.24(b) deduction was taken, which matters because the self-occupied ceiling would have limited what was actually allowed. Because the gain was short term, it decides nothing about indexation of the interest component or about the interaction with s.55. It does not consider whether the same reasoning would extend to interest capitalised but never claimed under s.24(b), which is the case the Finance Act 2023 amendment leaves untouched. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
On the interest issue the Revenue's appeal failed: a deduction under s.24(b) and the computation of capital gains under s.48 fall under different heads of income and neither provision excludes the operation of the other, so the assessee was entitled to include the interest in the cost when computing capital gains under s.48, and the deletion of the Rs 4,82,042 addition was upheld (para 8). But the appeal was not dismissed. The second issue - the Rs 9,94,542 addition under income from other sources - was restored to the file of the Commissioner (Appeals), the Tribunal holding that he had decided the point on the evidence of the loan transactions without addressing the legal question whether a salaried assessee's single loan transaction can be called a business activity, and directing him to decide that afresh after hearing the assessee. The order records the result as the Revenue's appeal being partly accepted for statistical purposes (paras 9 and 10).
TaxSphere, “ACIT v C Ramabrahmam”, https://taxnotice.vittsphere.com/caselaw/case/acit-v-c-ramabrahmam-24b-interest-in-cost-of-acquisition/ (validity last checked 2026-08-20)
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I am selling the house. Can I add the home loan interest to the cost of acquisition under s.48, with indexation, on top of whatever I claimed under s.24(b)?
Is there a ceiling on the interest I can deduct on a house that is let out?
I bought a site from a government body on instalments and pay interest on the unpaid instalments. There is no bank and no loan document. The officer says there is no borrowed capital, so no s.24(b) deduction. Is he right?
I booked a flat years ago and have been paying the home loan, but the builder and the society are in litigation and I still have no possession. The officer has disallowed my s.24(b) interest because I do not occupy the flat. Can he do that?
