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TMI Blog2015 (12) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in rejecting the claim of the assessee that it was held as stock in trade. Consequently, the tax authorities are justified in rejecting the claim of revaluation loss arising on account of fall in the price of shares. Disallowance made u/s 14A - Held that:- we notice that the assessee itself has admitted that the shares of Deepak Fertilizers & Petrochemicals Ltd were purchased out of loan of ₹ 20.75 crores taken from M/s Nova Synthetics Ltd and the assessee itself has computed the interest of ₹ 40.94 lakhs as pertaining to the investment made in the shares of Deepak Fertilizers. Hence the interest expenditure of ₹ 40.94 lakhs cannot be taken as expenditure relating to the business carried on by the assessee, but it is related to the investment made in the shares. Hence, the interest expenditure is otherwise not allowable under the normal provisions of the Act. Accordingly, we confirm the disallowance of ₹ 40.94 lakhs made by the AO. Disallowance of interest expenditure u/s 24 - Since the assessee had not let out the house property, the AO held that the assessee cannot claim the same u/s 24 of the Act also - Held that:- The Ld D.R submitted that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other company either during the year under consideration or in the preceding or succeeding years. Accordingly, the AO held that the purchase of shares of the company cited above shall be taken as Investment activity of the assessee and accordingly rejected the claim of Stock in trade . Accordingly he disallowed the claim of loss arising on account of revaluation of shares. The Ld CIT(A) also confirmed the same. 5. The Ld A.R submitted that the assessee has classified the shares as Stock in trade in its books of accounts. Further, the assessee has purchased the shares out of borrowed funds. He further submitted that the memorandum of association of the assessee company permits dealing in shares. Accordingly he submitted that the assessee s intention at the time of purchase of shares was to hold it as Stock in trade only. Accordingly he submitted that the assessee has valued the closing stock of shares at Cost or market value whichever is less and accordingly contended that the loss arising on revaluation of shares should be allowed. 6. On the contrary, the Ld D.R submitted that the memorandum of articles usually lists out all types of businesses and hence, what is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the entries passed in the books of account and also the fact that the shares were purchased out of borrowed funds in order to support its contentions that it intended to purchase the shares as stock in trade. However, as held by Ld CIT(A), these two factors alone cannot be taken as determinative factors and accordingly the intention of the assessee should be gathered from the conduct of the party and surrounding circumstances. We also notice that the assessee had originally disallowed part of interest expenditure relating to the purchase of shares of M/s Deepak Fertilizers Petrochemicals Ltd treating the same as investment, but retracted from the same only during the course of assessment proceedings. Hence, in our view, the conduct of the assessee and the factors surrounding the issue shows that the assessee had intended to purchase the shares of the above said company only to hold them as investments. Hence we are of the view that the tax authorities are justified in rejecting the claim of the assessee that it was held as stock in trade. Consequently, the tax authorities are justified in rejecting the claim of revaluation loss arising on account of fall in the price of shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest of ₹ 40.94 lakhs as pertaining to the investment made in the shares of Deepak Fertilizers. Hence the interest expenditure of ₹ 40.94 lakhs cannot be taken as expenditure relating to the business carried on by the assessee, but it is related to the investment made in the shares. Hence, the interest expenditure is otherwise not allowable under the normal provisions of the Act. Accordingly, we confirm the disallowance of ₹ 40.94 lakhs made by the AO. 13. We shall now take up the appeal filed by the revenue, which relates to the disallowance of interest expenditure of ₹ 71,72,215/- claimed by the assessee. The assessee had purchased a flat for a sum of ₹ 12.43 crores out of funds borrowed from M/s Nova Synthetics. Initially the assessee disallowed a sum of ₹ 90,811/- out of interest expenditure as relating to purchase of flat. During the course of assessment proceedings, it revised the amount of interest attributable to purchase of flat to ₹ 71,72,215/- and claimed the same as deduction u/s 24 of the Act under the head Income from House property by computing the notional rental income of ₹ 3.25 lacs. The AO held that the inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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