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2023 (7) TMI 493 - ITAT MUMBAICost of Acquistion of investment in Shares - Capitalization of interest expenses - Borrowing cost - Accounting Standard 16 - AO and CIT(A) disallowed the capitalization - interest on money borrowed for investment in share capital - HELD THAT:- The assessee has neither claimed the impugned amount as expenditure in the statement of income nor there has been any sale of shares where the said cost of acquisition has been claimed as a deduction. Therefore we see merit in the argument of the ld AR that the lower authorities holding against the capitalization of interest for the years under consideration is not warranted. As per the Accounting Standard 16, the borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset should be capitalised as part of the cost of that asset. It is accordingly submitted by assessee has followed the Accounting Standard while preparing the financial statements and the same cannot questioned without rejecting the books of accounts. Lower authorities have no reason to hold against the assessee following certain accounting standard, unless there is an impact to the amount offered to tax by the assessee during the years under consideration. When in the years under consideration there is no taxable event that is adversely affected by the capitalization of interest by the assessee in the books of accounts, the CIT(A) / AO cannot hold that the interest capitalized cannot be part of the cost of acquisition. The impugned capitalization is merely an accounting treatment and does not have any impact on the income offered to tax during the years under consideration. We will limit our adjudication only to the extent of holding that it is not warranted on the part of the lower authorities to decide against the capitalization of interest to be part of cost of acquisition since there is no taxable event happened during the years under consideration that is adversely impacted by such treatment. We, accordingly, allow the appeal leaving open the right of the Revenue to examine the issue of whether the interest paid to be part of cost of acquisition or not, in the year in which a taxable event occurs involving the cost of acquisition, i.e. the year in which the assessee sells the investment and the capital gain is computed.
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