TMI Blog2021 (3) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 capitalize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Gains in the facts and circumstances of the case. 3. We have heard the rival submissions and perused the materials available on record. We find that the assessee is an individual and had filed his return of income for the Asst Year 2015-16 on 30.9.2015 declaring total income of ₹ 1,01,16,030/-. The assessee is having business income, income from house property , income from short term and long term capital gains and income from other sources. We find that the assessee had sought to reduce the taxable short term capital gains with the claim of deduction towards interest and other charges amounting to ₹ 12,15,500/- which was objected by the ld AO and accordingly the ld AO disallowed the said interest as not allowable u/s 48 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st was debited by the share broker itself as funds were admittedly borrowed from the broker for purchasing shares of Indiabulls Hsg Fin Ltd. Accordingly the assessee pleaded that this interest cost is part of the cost of acquisition as one to one nexus between borrowed funds with the investment in shares thereon are proved beyond doubt. The assessee submitted the copies of the bill and ledger of the broker before the ld AO to support this contention vide letter dated 15.12.2017. 3.3. It is not in dispute that the assessee had claimed deduction towards interest in the sum of ₹ 12,15,500/- under the head short term capital gains. Admittedly the short term capital gains falls under the ambit of Securities Transactions and hence woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of S Balan alias Shunmugam vs DCIT reported in 120 ITD 469 wherein it was held as under:- 7. To deal with the first question, it is worth mentioning in the beginning itself that the admitted position is as per the statement made by the ld. A.R. that the burden of interest has never been claimed by the assessee as a revenue expenditure, but it was always being capitalized in the past. The revenue authorities have also mentioned that the investment in shares was out of the cash credit account showing a debit balance, naturally burdened with the interest amount. It has not been denied by the revenue authorities that the money was not borrowed for acquiring the capital assets i.e., the share scripts in question. Within this narrow com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the borrowed funds having liability of interest, and since it had been capitalized in the books of account treated as a part of cost of asset and never claimed as a revenue expenditure, then that too is towards enhancing the cost of such capital asset and cannot be segregated from the cost of acquisition. Nevertheless, this question has been answered by few decisions as relied upon by ld. A.R. namely Mithlesh Kumari's case (supra) wherein the Hon'ble Court has held that the interest paid by the assessee on money borrowed for the purchase of an open plot of land constituted part of actual cost of the assessee, for the purpose of determining the capital gain derived from the sale of the land. Facts were that the loan was raised from m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture incurred for bringing into existence such asset must be included in the cost of acquisition. It was concluded that the capitalized interest must be included in actual cost. We have also examined an another decision as cited by the appellant, decided by Hon'ble Karnataka High Court in the case of Maithreyi Pai (supra) and have found that the question was the deduction of interest on borrowings utilized for purchase of shares and whether such interest constituted part of cost of acquisition of shares for the purpose of computation of capital gain. The ITO has disallowed the claim on the ground that the interest had already been allowed as a deduction under section 57 while computing income from dividend, so the revenue has contended ..... X X X X Extracts X X X X X X X X Extracts X X X X
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