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TMI Blog2007 (7) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that the profit/loss on purchase and sale of shares of Raasi Cements Ltd. should be treated as capital gain/loss and also allowing indexation benefit? 2. Whether in the facts and circumstances of the case, the Tribunal was right in allowing the interest liability incurred on borrowings to acquire the shares?" 2. The facts leading to the above substantial questions of law are as under : 3. The assessee is a Public Limited Company and is carrying on the business of investment in shares and securities. The relevant assessment year is 2000-2001 and the corresponding accounting year ended on 31.03.2000. The assessee filed its Return of income on 30.11.2000 declaring loss of Rs.15,62,90,890/-. The Return was processed under Section 143(1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare. It resulted in long term capital loss as well as short term capital loss. The Assessing Officer did not accept the same under the head "capital gain" and held that the entire share holdings would constitute business assets of the assessee company and hence indexation of cost of acquisition benefit could not be extended to the assessee. On the issue of interest liability, the Assessing Officer disallowed the same on the ground that the entire transaction was carried out on behalf of the ICL. Aggrieved by the order, the assessee filed an appeal to the Commissioner of Income-tax (Appeals) ("CIT(A)" in short). The Commissioner of Income Tax (Appeals) dismissed the appeal and confirmed the order of the Assessing Officer. Aggrieved, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est or the intention was in the nature of trade. As per the Memorandum of Association of the assessee company, it could be seen that the assessee company was incorporated on 24.01.1995 under the Companies Act, 1956 to engage in the business of investment. The Tribunal considered the relevant materials and evidences and held in Paragraph-8 of its order, as follows:- "On a consideration of rival submission, we are of the view that the assessee's contention is justified in law. It is also a point for consideration that the Department never attempted to lift the corporate veil to see the real nature of the transaction. Right from the Memorandum of Association, the object of the assessee company is only to as an investment company. Particularly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Question No.2, the interest liability on the borrowed funds was debited in the books of the assessee-company. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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