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2019 (4) TMI 1779 - ITAT KOLKATADisallowance of broken period interest paid on deposits and borrowings etc - HELD THAT:- As decided in assessee's own case for 2009-10 If pre acquisition interest on purchase of a Govt. Security is the cost of purchase of such security, then pre acquisition interest on sale of the same security should be treated as sale price of security. Otherwise in both cases the pre acquisition interest should be treated as revenue transactions. The assessee is consistently follow the method of accounting wherein, pre-acquisition interest of security is treated as revenue expenditure and preacquisition interest on sale of a govt. security is taken as income. The Central Board of Direct Taxes in circular no.559 dated 24.04.1999 189 ITR (ST) 126 has clarified that securities held by bank must be regarded as stock in trade and that interest payments and receipts from broken period on purchase of securities must be regarded as stock in trade and that the net interest on securities should be brought to tax as business as business income. This circular was later withdrawn by CBDT and it was clarified that the issue whether a particular investment in security would constitute stock in trade or not is a question of fact. All these issues have not been properly considered by the A.O. or the Ld. CIT-A. The addition under such circumstances cannot be sustained - Decided against revenue.
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