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TMI Blog2013 (10) TMI 1136X X X X Extracts X X X X X X X X Extracts X X X X ..... f shares. 3. Relevant facts giving rise to this appeal are that the assessee is an individual deriving income from house property, shares in profits of partnership firm, capital gains on sale of shares, dividend and bank interest. For the assessment year under consideration, the return of income was filed on 25.8.2005 declaring income at Rs.57,49,475/-. The assessment was completed u/s 143(3) of the Income Tax Act, 1961 (the Act) on 10.7.2007 determining the total income at Rs.70,51,180/-. It is relevant to state that at the time of making the original assessment, the AO allowed capitalization of the interest paid on purchase of shares towards cost of acquisition while computing the capital gain. However, ld. Commissioner of Income Tax u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the assessee applied in the IPOs (Initial Public Offerings) of NTPC Ltd., NDTV Ltd, and Datamatics Ltd. and used partially her own funds and partially out of funding from the financial institutions. We may state that the details of the said shares, the details of funds owned, funds borrowed and the payment of interest are mentioned hereinabove in para 3. Ld. AR submitted that interest paid to financial institutions on the amount borrowed by the assessee till the date of allotment of the said shares has direct relation to the shares allotted under IPOs. Thus, the said interest has been paid as cost of acquisition for the purpose of computing the capital gains. Ld. AR submitted that there is a clear nexus between interest paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Modern Info Technology P.Ltd. V/s ITO in ITA No.4294/Del/2012 (AY-2009-10) observed and held that no disallowance u/s 14A is called for when the assessee has not incurred and claimed any expenditure for earning the exempt income. Ld. AR also referred the following decisions : (a) CIT V/s Trishul Investment Ltd (215 CTR 96) (Mad); (b) Smt. Neera Jain V/s ACIT in ITA No.1861/Mum/2009; (c ) Rajesh Ramswarop Agarwal V/s ITO in ITA No.5157/Mum/2008; He further submitted that the decision of Macintosh Finance Estates Ltd (supra) relied upon by the ld. CIT(A) is distinguishable as in that case the assessee was not an investor but was a Non-Banking Finance Company which paid interest on borrowed funds and claimed it as deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a clear nexus between the interest paid and the allotment of shares of NTPC Ltd., NDTV Ltd, and Datamatics Ltd. to the assessee and also income on sale of those shares has been considered under the head "Short term capital gain/short term capital loss". We observe that the assessee has considered the payment of interest in respect of shares for which the loan was taken as cost of acquisition of those shares. Therefore, the assessee has reduced full value of cost of acquisition from the sale consideration while computing the capital gain. It is not in dispute that the assessee has capitalized the interest and considered it as part of cost of cost of acquisition as per section 48 of the Act. The department has not disputed the contention o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll will not deprive the assessee from claiming the entire interest paid as part of the cost of acquisition of the shares allowed, as money borrowed has direct nexus with acquisition of shares. The Tribunal directed the assessing officer to treat the interest paid by the assessee to both the financiers as part of cost of acquisitions of shares allow the same as a deduction." Similar view has also been taken by the Tribunal Mumbai Bench in Rajesh Ramswarop Agarwal (supra) has held as under : "It is not disputed that the assessee had borrowed funds for investing in IPO and the shares acquired through IPO were sold. Therefore, whatever the interest was paid for the period till the date of allotment of shares had to be treated as part of cost ..... X X X X Extracts X X X X X X X X Extracts X X X X
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