TMI Blog2011 (7) TMI 1160X X X X Extracts X X X X X X X X Extracts X X X X ..... hares of GTL in F.Y. 1999-00 for consideration of ₹ 1,10,31,400/-. Consideration had been paid out of borrowed funds on which assessee had paid interest in the subsequent two years which had been added to cost of acquisition while computing capital gain. The Assessing Officer observed that interest on borrowings had been paid after purchase of shares and capitalization of interest was not in accordance with accounting standards and therefore, he did not allow capitalization of interest. In appeal, CIT(A) observed that there was no dispute that borrowings had been used for repayment of creditors for purchase of shares, as the shares had been purchased on credit. He referred the judgment of Hon ble Karnataka High Court in the case of CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be capitalized as same can be allowed only while computing income from other sources received from the investment. 5. We have perused the records and considered the rival contentions carefully. The dispute is regarding capitalization of interest paid on borrowings for acquisition of shares while computing capital gain from sale of shares. There is no dispute that the shares had been acquired from borrowed funds. The dispute is whether interest on borrowings can be added to the cost of acquisition of shares. We find that similiar situation had been considered by the Hon ble Delhi High Court in the case of CIT vs. Mithilesh Kumari (92 ITR 9) in which the Hon ble High Court held that interest paid on borrowings used for purchase of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure would definitely be part of cost of acquisition. We also find that the case of the assessee is covered by the decision of Pune Bench of the Tribunal in the case of S. Balan alias Shanmugam (129 ITD 869), which is directly on the point as in that case also the issue was regarding allowability of interest as part of cost of acquisition of shares. In that case, the CIT(A) had held that since intention of investment in shares was for earning of dividend and as the said dividend income was exempt from tax, the interest expenditure could not be taken into account in view of the provisions of section 14A. The view taken by the CIT(A) was not accepted by the Tribunal. It was held that since the assessee had borrowed funds for acquisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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