SARTHAK JAIN

You've raised two separate issues here, so let us consider them individually. First Issue- Under section 54 the eligible asset which the assessee is required to transfer in order to avail the benefit of exemption is - "being buildings or lands appurtenant thereto, and being a residential house". Clearly, the literal meaning of phrases used under this section indicates that residential plot is not eligible for exemption as it can not be treated as building/residential house by any stretch of imagination. Therefore, no such exemption is available under section 54. However, section 54F provides for exemption in such cases as it applies when the asset transferred is "other than a residential house". Hence, in your case, exemption under section 54F is available subject to other conditions as prescribed under that section. Second Issue- Yes,the interest payable on money borrowed for acquiring capital asset constitute cost of acquisition of a capital asset, being directly and inextricably linked to the acquisition thereof. It is irrelevant whether the loan is taken from financial institutions or relatives (private arrangements). There are various judicial decisions holding interest as part of cost of acquisition like CIT v/s Mithlesh Kumari(1973)92 ITR 9 (Del). Hope this clarifies.