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2022 (1) TMI 240 - AT - Income TaxCapital gain computation - disallowance of indexed interest cost while computing capital gains - assessee while computing capital gains had reduced the indexed interest cost, being interest cost incurred for acquiring the relevant shares, but the same was denied by the lower authorities - HELD THAT:- We find that identical issue arose in the case of Fritz Desilva [2015 (5) TMI 1125 - ITAT MUMBAI] after relying on the decision of Hon’ble Madras High Court in the case of Trishul Investments Ltd. [2007 (7) TMI 252 - MADRAS HIGH COURT] held that interest paid for acquisition of shares would partake the character of cost of shares and therefore the interest would be considered as cost of acquisition for the purpose of computing of capital gains. We further find that in the case of CIT vs. Maithreyi Pai [1983 (11) TMI 43 - KARNATAKA HIGH COURT] has held that the interest paid on borrowings for the acquisition of a capital asset must fall for deduction u/s 48, if the same sum has not been claimed as deduction under any other heads. Submissions of the assessee about the interest paid for acquisition of the shares having not been claimed as deduction in any of the earlier years has been found false or has been controverted by Revenue by bringing any contrary material on record. In such a situation, we relying on the aforesaid decisions, are of the view that the interest payable by the assessee for acquisition of shares should be added to the cost of acquisition and therefore be considered while computing capital gains. We therefore direct the AO to allow the indexed cost on account of interest on shares to compute the deduction under capital gains. Thus the grounds of assessee are allowed. Disallowance u/s 14A - AO noticed that assessee had received dividend which was claimed as exempt u/s 10(34) - HELD THAT:- We find that AO had given detailed reason to discard the assessee’s working of disallowance u/s 14A. In such a situation, we are of the view that the requirement of the statue has been satisfied. No infirmity in the action of AO in invoking the provisions of Rule 8D r.w. Section 14A for working the disallowance is concerned. Alternate submissions of the AR in working the disallowance u/s 14A only after considering the investment which have yielded tax free income is concerned, we find force in the submission of Learned AR. We find that in the case of CIT vs. Holcim India Pvt. Ltd.[2014 (9) TMI 434 - DELHI HIGH COURT], CIT vs. Corrtech Engineering Pvt. Ltd. [2014 (3) TMI 856 - GUJARAT HIGH COURT] and Shivam Motors (P.) Ltd. [2014 (5) TMI 592 - ALLAHABAD HIGH COURT] has held that Section 14A of the Act cannot be involved when no exempt income was earned. Before us, AR has submitted that out of the total investments which the AO has considered for working of disallowance u/s 14A r.w.r 8D, the investments which had yielded dividend were to the extent of ₹ 20,55,16,081/- (as on 31.03.2013) and ₹ 20,98,25,264/- (as on 31.03.2012). The contention of the assessee that it has received dividend only from the aforesaid investments has not been controverted by Revenue. In such a situation, relying on the aforesaid decisions, we are of the view that disallowance u/s 14A needs to be re-worked on the basis of the investments which have yielded tax free income. We therefore direct the AO to work out the disallowance u/s 14A r.w.r 8D on the basis of investments which had yielded dividend. Thus Ground of assessee is partly allowed.
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