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TMI Blog2019 (6) TMI 1219X X X X Extracts X X X X X X X X Extracts X X X X ..... Creations. He filed his return of income on 24.09.2015 declaring nil income. The Assessing Officer during the course of assessment proceedings noticed that the assessee has shown short term capital gain of Rs. 45,85,992/- on sale of shares after claiming interest expenses of Rs. 10,76,258/-. 3. The Assessing Officer asked the assessee to justify the claim of expenses of Rs. 10,76,258/-. Rejecting the various explanation given by the assessee, the Assessing Officer disallowed the interest expenses of Rs. 10,76,258/- by observing as under :- * Assessee has failed to establish the fact that the interest expenses incurred are actually with respect to the shares shown as part of short term capital gain alone. Mere written submission without a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the date of acquisition. Such interest expenses are not allowable as part of cost of acquisition. The said view gets support from the decision rendered in the case of V. Mahesh, ITO v. Vikram Sadanand Hoskote [2007] 18 SOT 130 (Mum), wherein it is held that the interest expenditure incurred on borrowed funds for the period commencing from the date of acquisition of shares till date of sale would not form part of cost of acquisition of share * Further, assessee cannot claim interest expenses in lump sum. If it was shown as business income such expenses were deductible. It is understandable that looking at the number and turnover of transactions, it is difficult to compute/ segregate interests cost pertaining to each security. But once a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation." 4. Before CIT(A) the assessee submitted that the interest of Rs. 10,76,258/- was charged by Motilal Oswal Financial Services Ltd. and its statement of account showing interest debited was filed with the AO. The source of funding of share transactions was also with the same company. Month-wise detail of interest charged by Motilal Oswal Financial Services Ltd. was filed during the assessment proceedings. It was submitted that amount of interest of Rs. 10,76,258/- was paid to Motilal Oswal Financial Services Ltd. only in respect of STCG on shares. It was also submitted that there was no interest paid for the period prior to purchase of shares and the assessee has allocated amount of interest against each security and the statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,260/- being the amount of interest claimed as deduction in computing the Short Term Capital Gain. 3. That the Learned Commissioner of Income-tax (Appeals) has erred in not allowing the capitalizing of interest paid on investments and adjusting the same against Short Term Capital Gain. 4. That the further grounds shall be submitted at the time of hearing. 7. The Ld. Counsel for the assessee strongly challenged the order of the CIT(A) in confirming the action of the Assessing Officer. He submitted that the assessee has carried on share transactions which resulted in Short Term Capital Gain covering STT. An interest of Rs. 10,76,258/- was incurred on borrowings made for acquisition of investments made in shares and was paid to Motilal O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that against short term capital gain (covering STT) interest of Rs. 4,90,555/- was claimed and was accepted. He accordingly submitted that the interest expenditure of Rs. 10,76,258/- should be allowed as deduction. 9. The Ld. DR on the other hand heavily relied on the order of the CIT(A). 10. I have considered the rival arguments made by both the sides and perused the orders of the authorities below. I have also considered the various decisions relied on by both the sides. I find the Assessing Officer in the instant case denied the claim of interest expenditure of Rs. 10,76,258/- as deduction from the short term capital gain on the ground that the same cannot be said to be incurred only on the shares kept for investment purposes as t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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