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2020 (6) TMI 240 - AT - Income TaxDisallowing the interest cost incurred in connection with the acquisition of shares to be capitalized - whether interest incurred for the acquisition of shares is not the part of cost of capital asset? - AO in his order held that the impugned interest expenses can be allowed as revenue in nature - CIT (A) held that such interest expenses cannot be capitalized and further directed the AO not to allow such expenses as revenue in nature - HELD THAT:- Once the assessee has been held as Investment Company, then the interest expenses directly attributable to such investments required to be capitalized. In this regard we find support and guidance from the judgement of CIT versus Trishul Investments Ltd [2007 (7) TMI 252 - MADRAS HIGH COURT] held interest paid for acquisition of shares would partake character of cost of share and, therefore, the same was rightly capitalized along with the cost of acquisition of shares. Thus we are of the view that the impugned interest expenses needs to be capitalized. - Decided in favour of assessee Deduction u/s 35D - deduction of 1/5 of such expenditure - expenses incurred on the increase of authorized capital /stamp duty for allotment of shares - HELD THAT:- It is a fact on records that the expenditure in connection with the increase in authorized share capital was incurred before the commencement of the business. Therefore we hold that the assessee is eligible for deduction of the impugned expenditure under the provisions of section 35D of the Act. In view of the above, we set aside the finding of the learned CIT (A) and direct the AO to allow the claim of the assessee. Hence the ground of appeal of the assessee is allowed. Disallowance u/s 14A - Whether expenses relatable to earning exempt income cannot be allowed - HELD THAT:- Amount of disallowance of the expenditure cannot exceed the amount of exempted income in the case of CIT vs. Vision Finstock Stock Ltd. [2017 (7) TMI 1277 - GUJARAT HIGH COURT] - we hold that the disallowance of the expenses under section 14A read with rule 8D cannot exceed the amount of exempted income. Hence we do not find any reason to interfere in the order of the learned CIT (A). Accordingly, we direct the AO to delete the addition made by him. Hence the ground of appeal of the Revenue is dismissed. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [2020 (5) TMI 359 - ITAT MUMBAI]
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