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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 ..... n as accrued to the assessee on the sale of shares of NTPC Ltd., NDTV Ltd, and Datamatics Ltd has to be considered after considering the payment of the said interest as part of cost of acquisition. Since, the short term capital gain is taxable under the Act, the provisions of section 14A is not applicable on the facts and circumstances of the case – Appeal allowed – Decided in favor of Assessee. - I.T.A. No.2393/Mum/2012 - - - Dated:- 9-10-2013 - Shri B. R. Mittal,(JM) And Sanjay Arora (AM),JJ. For the Appellant : Shri Devendra A Mehta For the Respondent : Shri Surendra Kumar ORDER Per B. R. Mittal, JM : The assessee has filed this appeal for assessment year 2005-06 against order of ld. CIT(A) dated 8.2.2012. 2. Only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 5 of assessment order as under :- Name of company NTPC Ltd. Datamatics Ltd NDTV Ltd. Total No.of shares Applied 15,00,000 1,00,000 7,65,000 Allotted 1,25,690 1,950 6,200 Application money Own funds 1,86,00,000 7,50,000 38,25,000 Borrowed funds 7,44,00,000 1,02,50,000 4,97,25,000 Total 9,30,00,000 1,10,00,000 5,35,50,000 Interest paid 7,03,960 82,000 4,72,388 12,58,348 Interest paid partly Kot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .36 (1)(iii) of the Act. Ld. AR submitted that assessee did not derive any dividend from the said shares. The only income derived by the assessee from those shares is short term capital gain, which is taxable under the Act. Since, assessee capitalized the interest, it constitutes cost of acquisition. Ld. AR submitted that the income from the said shares is not exempt under the Act, the provisions of section 14A of the Act does not apply. Ld. AR referred the decision of Hon'ble Bombay High Court in the case of CIT V/s Reliance Industries Ltd. (2010) 8 Taxmann.com 218 (Bom) and submitted that no disallowance under section 14A is called for when there is no fact of having incurred any expenditure for the purpose of earning the dividend income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "stock-in-trade". However, the assessee is an investor and not a trader, engaged in the purchase and sale of shares. That the profit on sale of shares has been assessed as capital gains. That the assessee has capitalized the interest paid on purchase of shares as a part of cost of acquisition and never claimed deduction or allowed deduction thereof u/s 57/37(1)/36(1)(iii) of the Act. Further, the only income which was derived from those shares on which the interest has been paid is short capital gain which is taxable under the provisions of Act. Ld.AR submitted that the provisions of section 14A is not applicable and the interest should be considered as cost of acquisition and the short term capital gains be computed accordingly. 6. On t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lordships as under : "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 to warrant interference." We also observe that the ITAT Mumbai Bench in the case of Smt.Neera Jain (supra) has also con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and also the cases cited before us (supra) we hold that the entire interest has been paid by the assessee as a part of cost of acquisition of shares allotted, is to be treated as cost of acquisition because on perusal of all the details from the table as mentioned hereinabove in para 3 there is a direct nexus between the borrowed money and the cost of acquisition of shares by assessee. The assessee is entitled to capitalize the said interest as part of cost of acquisition as per section 48 of the Act. Hence, short term capital gain as accrued to the assessee on the sale of shares of NTPC Ltd., NDTV Ltd, and Datamatics Ltd has to be considered after considering the payment of the said interest as part of cost of acquisition. Since, the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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