2015 (10) TMI 733 - AT - Income Tax

Disallowance of interest expenditure claimed against Short Term Capital Gains - Held that - In the instant case, it is not the case of the assessee that she has applied for Shares under Initial Public Offering. Hence, the case laws relied upon by Ld A.R is not applicable to the instant case. The question of deduction of interest against the sale value of shares would arise only if the interest expenditure is capitalized. In the instant case, it is not shown to us that the assessee has capitalized the interest expenditure in accordance with the principles discussed above. Accordingly, in our view, the Ld CIT(A) was justified in holding that the interest expenditure is not deductible against short term capital gains. - Decided against assessee. Non consideration of revised return of income - According to the assessee, the Ld CIT(A) was not correct in holding that the said fact is relevant only for penalty proceedings - Held that - We have already noticed that the assessee has filed revised return of income only on 26.07.2010. Under the provisions of sec. 139(5), the revised return of income for the year under consideration could be filed on or before 31.3.2010. Since the revised return of income was filed by the assessee after the expiry of the time limit prescribed under the Act, the AO did not consider the same. As stated earlier, the AO has made certain observations by making certain inferences. Since those inferences are not relevant in the quantum assessment proceedings, the Ld CIT(A) held the ground urged against the same as premature. Though the assessee has urged this ground in this regard, we also do not find necessary to express any opinion in this regard. - Decided against assessee.

Summary

Issues:
1. Disallowance of interest expenditure against Short Term Capital Gains
2. Consideration of revised return of income

Analysis:
1. The first issue pertains to the disallowance of interest expenditure claimed by the assessee against Short Term Capital Gains. The assessee argued that the bank interest on loans for purchasing shares should be considered as part of the "Cost of acquisition of shares." However, the assessing officer and the Ld CIT(A) did not accept this claim, stating that sec. 48 does not allow deduction of interest expenses against Capital gains. The tribunal analyzed relevant case laws and provisions, concluding that interest expenditure up to the period before an asset is first put to use must be capitalized, while interest for subsequent periods is allowable as revenue expenditure. As the shares were purchased and not used, the interest expenditure was not capitalizable. Therefore, the Ld CIT(A) was correct in disallowing the interest expenditure against short term capital gains.

2. The second issue concerns the revised return of income filed by the assessee during assessment proceedings. The AO rejected the revised return as invalid since it was filed after the prescribed time limit under sec. 139(5) of the Act. The AO inferred that the revised return was an attempt to avoid exposure of an incorrect claim made in the original return. The Ld CIT(A) deemed these observations relevant for penalty proceedings and rejected the challenge against them. The tribunal concurred, stating that the observations were premature for the quantum assessment and dismissed the appeal on this ground. As the revised return was filed after the deadline, it was not considered valid, and the tribunal upheld the decision to dismiss the appeal.

In conclusion, the tribunal upheld the disallowance of interest expenditure against Short Term Capital Gains and the rejection of the revised return of income, leading to the dismissal of the appeal by the assessee.