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TMI Blog2018 (2) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed. Disallowance of interest paid on loan taken for purchase of shares of Ganpati Sugar Industries Ltd., which was part and parcel of the stock-in-trade - Held that:- The assessee is engaged in the business of dealing in shares. It is not in dispute that the assessee is already holding 11,30,000 shares of M/s Ganpati Sugar Industries Limited and which is part and parcel of its stock-in-trade of the trading business. Hence, it could be safely concluded that the additional investment which was made by the assessee out of borrowed funds were also made only for the purpose of business. AO had observed in the assessment order that the assessee has been allotted by M/s Ganpati Sugar Industries Limited by converting the share application money into share capital in assessment year 2005-06. In any case, once the borrowing has been accepted as being used for business purposes in the year of borrowing, then any interest paid thereon in subsequent years cannot be the subject matter of disallowance as the closing balance of borrowings at the end of earlier year would become the opening balance of borrowings at the beginning of this year. Department cannot take different stand during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2002) dated 31.01.1998, the assessee had valued the closing stock of unquoted shares at lower of cost or break up value per share as on 31.03.2004. Pursuant to this valuation, the assessee had incurred loss arising due to diminution in value of closing stock amounting to ₹ 30,76,750/- in respect of unquoted shares. The Ld. AO did not allow this loss arising due to diminution in value of closing stock of unquoted shares in the assessment. However, the Ld. AO observed in the assessment order that the diminution in value of closing stock of quoted share is allowable. 4. Before the first appellate authority, the assessee contended that the finding given by the Ld. AO has no basis in view of the specific provisions contained in section 145A of the Act which states that notwithstanding anything to the contrary contained in Section 145, the valuation of purchase and sale of goods and inventory for the purpose of determining the income chargeable under the head profits and gains of business or profession shall be increased with the method of accounting regularly employed by the assessee .. . The assessee pleaded that as per the requirement of law, the valuation of invent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame method of valuation of stock all along in the past. That the said method has been regularly followed by the appellant-company has also been certified by the Chartered Accountants, as it appears from the records. In the said situation, and considering the judicial precedents, I am unable to sustain the addition/ disallowance made by the AO, and the same is directed to be deleted. 6. Aggrieved the revenue is in appeal before us on the following grounds: 1. That the order dated 04.03.2016 of the Ld. CIT(A) -23, Kolkata is unjustified, arbitrary, prejudged against the weight of the evidence on record and bad in law. 2. That the Ld. CIT(A)-23, Kolkata has erred in not sustaining the disallowance of notional diminutive valuation of closing stock of ₹ 30,76,750/- made by the AO without appreciating the facts that unquoted shares and quoted shares are different in nature and in all spheres, they are treated in different ways and diminutive value of shares in stock is only allowable in cases of quoted shares this is not allowable. 3. That the appellant craves leave to add, to amend any of these grounds before or at the time of hearing. 7. We have heard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us. In view of the aforesaid facts and findings we do not find any justifiable reason to interfere in the order of the Ld. CIT(A) in this regard and hence, we do not find any infirmity in the order of the Ld. CIT(A) with regard to the issue. Accordingly, grounds raised by the Revenue are dismissed. 8. Now let us come to Cross Objections raised by the assessee. 9. The only issue raised by the assessee in its cross objections is as to whether the Ld. CIT(A) was justified in upholding the disallowance of interest of ₹ 5,31,000/- paid on loan taken for purchase of shares of Ganpati Sugar Industries Ltd., which was part and parcel of the stock-in-trade, in the facts and circumstances of the case. 10. The brief facts of this issue is that the assessee being a dealer in shares had been purchasing and selling the shares of various companies. The assessee was already holding 11,30,000 shares of M/s Ganpati Sugar Industries Ltd. The assessee borrowed monies in the earlier years and utilized partly towards advance for share application money in Ganpati Sugar Industries Limited to the tune of ₹ 90 lacs. The loan borrowed by the assessee in the earlier years had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed funds to the tune of ₹ 90 lacs. were used by the assessee for making advance towards share application money in M/s Ganpati Sugar Industries Ltd. and such advance was lying as on 31.03.2004. Hence, it could be safely concluded that the assessee had paid interest on the loans borrowed in the earlier years which were utilized for advance towards share application money in Ganpati Sugar Industries Limited. In our considered opinion, the assessee is engaged in the business of dealing in shares. It is not in dispute that the assessee is already holding 11,30,000 shares of M/s Ganpati Sugar Industries Limited and which is part and parcel of its stock-in-trade of the trading business. Hence, it could be safely concluded that the additional investment which was made by the assessee out of borrowed funds were also made only for the purpose of business. The Ld. AO had observed in the assessment order that the assessee has been allotted by M/s Ganpati Sugar Industries Limited by converting the share application money into share capital in assessment year 2005-06. In any case, once the borrowing has been accepted as being used for business purposes in the year of borrowing, then any i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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