TMI Blog2023 (2) TMI 1071X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT(A) and, therefore, ground no.1 raised by the Revenue is dismissed. Interest paid on borrowings for investments in equity shares and assessed under the head short term capital gain - AO made disallowance as expenditure incurred subsequent to the purchase of assets cannot be considered as cost of acquisition - CIT(A) held that the assessee can capitalize the impugned interest as part of cost of acquisition u/s. 48 of the Act which is to be allowed as deduction against the STCG on transfer of shares - HELD THAT:- As relying on TRISHUL INVESTMENTS LTD. [ 2007 (7) TMI 252 - MADRAS HIGH COURT] we are of the considered view that the assessee s claim of interest on borrowings against STCG is to be allowed. We find no infirmity in the order of the ld. CIT(A) and we hereby dismiss ground no.2 filed by the Revenue. - ITA Nos. 7472 & 7473/Mum/2018 - - - Dated:- 24-2-2023 - SHRI PRASHANT MAHARISHI , AM AND MS. KAVITHA RAJAGOPAL , JM For the Assessee : Shri Atul T. Suraiya/Snehal Negandhi For the Revenue : Shri Vranda U Matkarni ORDER Per Kavitha Rajagopal, J M: These appeals are filed by the Revenue, challenging the order of the learned Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of its real estate business and held that the purchase of land for its business should be capitalized as work-in-progress , thereby disallowing the claim of interest expenses on capital borrowed for purchase of land by relying on the proviso to section 36(1)(iii) of the Act. The A.O. also relied on the decision of the co-ordinate bench in the case of M/s. Agritech Pvt. Ltd. vs.DCIT 21 Taxmann 174, which held that the interest expenses towards purchase of land which was to be developed should be capitalized under WIP . The A.O. thereby disallowed Rs.5,52,50,000/- u/s.36(1)(iii) of the Act. The A.O. recomputed the WIP of the project as below: WIP as per BS 356669998 Interest capitalized in AY 2013-14 7408219 Interest capitalized in AY 2014-15 55250000 WIP as on 31.03.2014 41,93,28,217 8. The ld. CIT(A) in the appeal filed by the assessee controverted the same and held that the issue pertaining to disallowance of interest was decided by the tribunal in assessee s case for A.Y. 2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat of the assessee, the Hon'ble High Court has held that the claim of the interest on moneys borrowed u/s. 36(1)(iii) of the Act is to be allowed irrespective of the fact that whether the said loan was utilized by the assessee for accruing an asset and it is irrelevant whether the said expenditure pertains to acquisition of revenue asset or capital asset. The said decision of the Hon'ble High Court has relied on the decision of Calico Dyeing Printing Works vs. CIT [1958] 34 ITR 265 (Bom), wherein it was held that the assessee has to prove that the borrowed capital was utilized for the purpose of its business. The relevant extract of the said decision is cited hereunder for ease of reference: FINDINGS : 4. From the facts found by the Tribunal on record, it is clear that assessee undertook twofold activities. It bought and sold flats. Secondly, the assessee was also engaged in the business of construction of buildings. The profits from the both the activities were assessed under Section 28 of the Income-tax Act. In this case, we are concerned with the second activity (hereinafter referred to, for the sake of brevity, as Kandivali Project ). According to the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to acquire a revenue asset or a capital asset. The said judgment of the Bombay High Court applies to the facts of this case. 5. For the reasons given hereinabove, we answer the above question in the affirmative i.e. in favour of the assessee and against the department. The Appeal is accordingly disposed of. No order as to costs. 11. In the present case in hand, it is evident that the said capital was borrowed for the purpose of the business of the assessee by way of purchase of land at Pali for its real estate purchase. 12. The ld. AR has also relied on the decision of the Hon'ble High Court in the case of Tetron Commercial Ltd. vs. CIT [2003] 133 Taxman 781 (Cal), wherein the said proposition was reiterated by the fact that the borrowed capital utilized for the purchase of business of the assessee, whether or not the same is in the nature of capital expenditure or revenue expenditure, the interest payable for the said loan is to be allowed u/s. 36(1)(iii) of the Act. 13. From the above observation and by respectfully following the cited decision, we are of the view that the assessee s claim of expenditure u/s. 36(1)(iii) of the Act is to be allowed. We do no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee also relied on the decision of the co-ordinate bench in the case of Neera Jain vs. ACIT, Circle-12(3), Mumbai in ITA No. 1861/Mum/2009 vide order dated 23.03.2009, wherein it was held that the interest paid by the assessee was part of acquisition of shares and the same was to be allowed as deduction. It is pertinent to cite the relevant extract from the decision of the Hon ble Madras High Court in the case of Trishul Investments Ltd. (supra) as below: 5. In respect of Question No.2, the interest liability on the borrowed funds was debited in the books of the assessee company. The Tribunal correctly held that the interest paid for acquisition of shares would partake character of cost of share and therefore the same was rightly capitalised along with the cost of acquisition of shares. There is no denial regarding the borrowed money for the acquisition of shares by the assessee. The Tribunal correctly held that the interest payable thereon should be added to the cost of acquisition of shares. The reasons given by the Tribunal are based on valid materials and evidence. Under these circumstances, we do not find any error or legal infirmity in the order of the Tribunal so as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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