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2011 (12) TMI 349 - AT - Income TaxAddition of Rs.33,84,090/- on account of interest on investment made in shares of M/s Mitra Fidelity Ltd at Rs.2,25,60,603/- during the year - Assessing Officer found that assessee made an investment of Rs.3,61,83,093/- in a group company M/S Mitra Fidelity Ltd and as assessee claimed interest on borrowed funds, he proportionately disallowed interest to the tune of Rs.54,77,464/- calculated at 15% on the entire investment - the transaction is of trading nature, there is no need to disallow any interest as the purchases were made in the course of business activity of assessee - Decided in favor of the assessee by way of direction to AO to allow the interest Regarding disallowance of interest at 18% in respect of premium on debentures - The ground raised by the Revenue is also misleading in the sense that the contention is to restrict the amount on the reason that the debentures were not redeemed in the later year and the debenture premium was not offered for taxation by the other company - As rightly held by the CIT (A) the NCDs were issued in the financial year 2001- 02 @ 18%. Interests are being allowed in the earlier 2 years. This being 3rd year there is no reason for disallowing part of amount - Ground is rejected Regarding disallowance of loss invoking the provisions of Explanation to section 73 - CIT (A) considered the facts of the claim and gave finding that the Assessing Officer lacks basic knowledge of accounting in considering the diminution in value of stock as speculation loss and further considered that there is profit in transactions, therefore, provisions of speculation loss does not arise under section 73 - As seen from the paper book placed on record, assessee has not claimed any diminution value in the year, whereas it is a negative debit to the expenditure a/c thereby increasing the profit in the Profit and Loss A/c. As seen from the details on record, there was a diminution of value in earlier year to the extent of Rs.3,57,53,239/- out of the gross value in the balance sheet - Decided in favor of the assessee
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