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TMI Blog2015 (12) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... ny - CIT(A) allowed claim - Held that:- AO has disallowed the conversion of the capital asset into stock-in-trade on the ground that there was no business activities carried on by assessee-company during the relevant previous year and Ld. CIT(A) has rejected the claim of the AO on the ground that Sec.45(2) of the Act provides the assessee to convert the capital asset into stock-in-trade at any time during the year. There is no prohibition under the Act, therefore the act of the assessee for converting the capital asset into stock-in-trade is within the ambit of law. From the aforesaid Section 45, it is very clear that action done by assessee for converting the investment into stock-in-trade is within the purview of the law. - Decided against revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... mount on the ground that there was no provision to allow the deduction of interest on a subsequent loan taken to repay the original loan. The AO has also relied on the order of this Tribunal in the case of ITO v. Satya Co. Ltd. (1986) 19 ITD 596 (Kol - Tribunal). 5. Aggrieved, assessee preferred appeal before Ld. CIT(A) where the Ld. AR demonstrated that the order of the AO was erroneous. For the sake of clarity, we reproduce submission of the Ld. AR as under:- i) The Ld. A.O has also misinterpreted the decision of the Calcutta Bench of the Tribunal in the case of ITO v. Satya Co. Ltd. (1986) 19 ITD 596 (Cal-Tribunal). The brief fact of the case is that the assessee company purchased a house property out of borrowed money. Subsequently, the assessee repaid the said loan by taking loan from another party. Then it again repaid it after borrowing money from some other party and so on. In this context the Tribunal held "that the words 'such capital' in section 24(1)(vi) definitely refer to the borrowed capital and, as such, the section confines the benefits of borrowed capital to repay the original loan only. The language is not capable of being extended to second or any subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue preferred appeal before the Tribunal. Shri Alok Nag, Ld. Departmental Representative appearing on behalf of Revenue and both Shri Devkr Kothari & Sri Manohar Agarwal Ld. Authorized Representative are appearing on behalf of assessee. 7. We have heard rival parties and perused the materials available on record. Before us Ld. DR supported the order of AO whereas Ld. AR supported the order of Ld. CIT(A). The Ld. AR submitted a paper book containing pages 1 to 106 and pleaded that interest paid on the money borrowed from the bank was very much eligible for deduction u/s. 24(b) of the Act and in support of his contention, Ld. AR cited following case laws:- a) Saltee Infotex (India) Pvt. Ltd. vs. DCIT in IT(SS) A No. 05/Kol/2012 dated 11.06.2013 b) ITO v. M.s Faith Real Estates P. Ltd. and others in ITA No. 5070 & 5181/Del/2011 dated 11.06.2011 c) ACIT v. Sunil Kr. Agarwal in ITA No.641/Luck/2010 (2011) 139 TTJ (Luck)(UO) 49 d) Realty Finance & Leasing (P) Ltd. v. ITO (2006) 5 SO 348 (Mumbai) From the aforesaid discussion, we find that the dispute is as to whether the assessee-company is entitled deduction for interest expenditure of ₹ 2,11,44,914/- from the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan. Explanation - For the purposes of this proviso, the expression "new loan" means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital.]" From the aforesaid explanation, it is very much clear that the subsequent loan taken by assessee to repay his original loan is very much covered for claim the deduction u/s. 24(b) of the Act. It is also important to note that assessee has taken a loan from SBM and same loan from the same bank was enhanced as a result of restructuring of the existing loan. Therefore, in this case no third loan was obtained by assessee. Therefore, we do not find any good and justifiable reason to interfere in the order of Ld. CIT(A). Hence, this ground of Revenue's appeal is dismissed. 8. Coming to Revenue's second ground. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal. 11. We have heard rival parties and perused the materials available on record. Before us Ld. DR supported the order of AO whereas Ld. AR supported the order of Ld. CIT(A). In this case, AO has disallowed the conversion of the capital asset into stock-in-trade on the ground that there was no business activities carried on by assessee-company during the relevant previous year and Ld. CIT(A) has rejected the claim of the AO on the ground that Sec.45(2) of the Act provides the assessee to convert the capital asset into stock-in-trade at any time during the year. There is no prohibition under the Act, therefore the act of the assessee for converting the capital asset into stock-in-trade is within the ambit of law. Before us, Ld. AR drew our attention on page-78 of the paper book of assessee, wherein the details of share held as stock-in-trade was furnished. A plain reading of Sec. 45 sub-(2) allows as below:- "Capital gains. 45 [(1)] Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections [***] [54, 54B, [***] [54D, [54E, [54EA, 54EB,] 54F [54G and 54H]]] be chargeable to income-tax under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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