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2021 (3) TMI 1060 - AT - Income TaxScope of Limited Scrutiny - Disallowance of interest as sought to be claimed as deduction from Short Term Capital Gains - HELD THAT:- It is not in dispute that the assessee had claimed deduction towards interest under the head short term capital gains. Admittedly the short term capital gains falls under the ambit of ‘Securities Transactions’ and hence would fall within the scope of ‘Limited Scrutiny’ . Accordingly, the Ground No. 1 raised by the assessee is hereby dismissed. Deduction of interest under the head ‘short term capital gains’ - HELD THAT:- As borrowed funds were indeed utilized for purchasing the shares of Indiabulls Hsg Fin Ltd. It is not in dispute that the said borrowings had suffered interest and that the said interest was debited by the share broker himself in the ledger account of the assessee. Hence one to one nexus of borrowed funds being utilized for making investment in shares which had yielded short term capital gains to the assessee, has been proved beyond doubt. Admittedly, the assessee had not claimed the interest cost as revenue expenditure under the head ‘Income from Business’ as he had rightly bifurcated the brokerage income which is offered under the head ‘Income from Business’ and share transactions under the head ‘Capital Gains’ being an investor in shares and securities. Since the interest cost of ₹ 12,15,500/- has been capitalized by the assessee , it partakes the character of cost of acquisition and gets added to the same thereon and hence would be eligible for deduction u/s 48 of the Act while computing the capital gains. The genuineness of the borrowings utilized for purchase of shares and payment of interest thereon to the broker is not disputed by the revenue. As relying on S. BALAN ALIAS SHANMUGAM BALKRISHNAN CHETTIAR. [2008 (1) TMI 489 - ITAT PUNE-B] we hold that the assessee is entitled for deduction of interest under the head ‘short term capital gains’.
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