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2019 (4) TMI 1912 - AT - Income TaxDisallowance of interest expenditure - computation of long term capital gain and short term capital - whether interest expenditure incurred by an assessee for acquiring the capital assets deserves to be capitalized and on its sale, required to be considered as cost of acquisition for the purpose of computation of capital gain? - HELD THAT:- If a capital asset is being purchased by way of borrowed funds, the interest expenditure are to be capitalized and on transfer of the capital assets, it is to be treated as part of cost of acquisition. A perusal of the order of the ld.CIT(A) would indicate that the ld.CIT(A) also did not dispute with regard to this proposition and has not rejected the claim of the assessee on legal aspect rather confirmed the disallowance on the ground that the assessee failed to establish nexus between borrowed funds vis-àvis investment. Revenue authorities have failed to appreciate the facts and circumstances in right perspective while holding that nexus has not been proved. The assessee has demonstrated that interest free funds were used for acquiring assets and interest expenditures were capitalized. Unsecured loans were remained outstanding at the end of every accounting year. It cannot be construed that nexus has not been demonstrated. We have noticed the order of the AO, which is absolutely silent on any of the aspects though the ld.CIT(A) has made reference to the details in order to demonstrate that the assessee failed to prove the nexus, but on re-appreciation of these very details we are of the view that the ld.CIT(A) has not appreciated the facts in right perspective, and considered them half-heartedly. Therefore, we allow the appeal of the assessee and delete the disallowance. - Decided in favour of assessee.
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