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2017 (11) TMI 372 - AT - Income TaxIncome from sale of shares - capital gain or business income - use of IPO funding availed by the assessee - Held that:- An undisputed fact is that the assessee has applied in the shares, acquired through IPO of the company from borrowed capital. Merely because the shares were purchased through borrowed capital cannot be the ground for capital gain, to be assessed as business income. The fact that the assessee paid interest on borrowings cannot be held against him, treating it business income, when there are other predominating natures which give clear impression that the assessee intended only to invest on shares and not to hold them as stock-in-trade. Therefore, we are of the view that assessee has worked as an Investor and not Trader. The IPO funding availed by the assessee was to get more allotment but the fact of the matter is that the assessee was an investor and the sole intention of applying in the shares through IPO was to get higher allotment of shares. There were no repetitive purchase and sale of the same script in the assessee’s case under consideration, which means that there was no churning of shares. Besides, the assessee has accumulated past losses, that is, short term/long term capital losses, and as per the assessment done by the Department in past years, he is entitled to set-off these losses form short term/long term capital gain in subsequent years, if the Department is changing its stand and treat the assessee as a trader in shares then assessee would not be able to set off these losses and this would be an harassment to the assessee, which is not acceptable. We note that the Department has been consistently accepting the assessee as an Investor in scrutiny proceedings, therefore, we do not uphold the order of the ld. CIT(A) following the Rule of consistency. See RadhasoamiSatsang vs. CIT (1991 (11) TMI 2 - SUPREME Court ). Thus no reason to treat the assessee as a trader. Direct the AO to treat the short-term capital gain / long-term capital gain as income under the head capital gain and treat the assessee as an Investor. - Decided in favour of assessee Disallowance of interest as cost of acquisition in computing the short-term capital gain - Held that:- We are of the view that the assessee under consideration is an investor and the interest paid on loan by the assessee was accepted by the AO as cost of investment and revenue expenditure in the assessment for the A.Y. 2010-11. The interest paid by the assessee, on the money borrowed for acquiring the shares, which is the cost for acquisition of shares. We, therefore, hold that the interest paid by the assessee on the money borrowed for purchase of shares should be treated as cost of acquisition in computing the short-term capital gain / long-term capital gain as the case may be. See case of Smt. Sunita A. Damani [2011 (11) TMI 788 - ITAT MUMBAI] - Decided in favour of assessee
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