2012 (3) TMI 590 - AT - Indian Laws

Summary

Issues involved:
The judgment deals with the issue of whether the interest paid for the acquisition of shares should be considered as the cost of acquisition for computing short term capital loss.

Summary:

Issue 1: Addition of interest for computing short term capital loss

The appellant, the Revenue, challenged the order of the Ld. CIT (A) regarding the deletion of the addition of interest paid for the acquisition of shares in computing short term capital loss for the Assessment Year 2008-09. The appellant contended that only the proportionate interest with reference to the shares allotted should be considered as cost, not the interest on the entire loan borrowed. The Assessing Officer disallowed the balance interest of Rs. 48,00,847 based on the proportionate interest calculation. However, the Ld. CIT (A) allowed the appeal of the assessee, stating that the interest paid to the financial institution for the loan raised for the acquisition of shares should be considered for the entire loan amount. The Ld. CIT (A) relied on the decision of the Hon'ble Mumbai Tribunal in a similar case. The Revenue appealed against this decision.

Issue 1 Details:

The Assessing Officer contended that the cost of acquisition should only include the proportionate interest with respect to the shares allotted, not the interest on the entire loan borrowed. The Ld. CIT (A) disagreed and allowed the interest paid to the financial institution for the entire loan amount to be considered as the cost of acquisition. The Tribunal noted that the borrowed funds were directly related to the acquisition of shares, even though only a portion of the applied shares was allotted. The Tribunal held that the interest paid by the assessee on the borrowed funds for acquiring the shares should be allowed as part of the cost of acquisition for computing short term capital loss. The Tribunal dismissed the appeal of the Revenue, upholding the decision of the Ld. CIT (A).

This summary provides a detailed overview of the judgment, focusing on the issues involved and the decision rendered by the Tribunal.