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of <h1>ITAT allows interest on shares as acquisition cost under Income Tax Act</h1> <h3>Smt. Neera Jain Versus The Asst. CIT, Circle 12(3) Mumbai</h3> Smt. Neera Jain Versus The Asst. CIT, Circle 12(3) Mumbai - TMI Issues:1. Disallowance of interest as part of cost of acquisition of shares under section 48 of the Income Tax Act.2. Levy of interest under section 234D.Analysis:Issue 1: Disallowance of interest as part of cost of acquisition of shares under section 48 of the Income Tax ActThe appellant challenged the order of the Ld CIT(A) regarding the disallowance of interest amounting to Rs.6,50,330 paid for acquiring shares. The appellant borrowed funds to apply for shares of two companies and capitalized the interest paid as part of the cost of acquisition. The Assessing Officer disallowed the entire interest amount, stating that the unutilized loan amount cannot be treated as the cost of acquisition. The Ld CIT(A) accepted that the interest paid for acquiring shares should be considered as part of the cost of acquisition but allowed it only to the extent of the borrowed amount utilized for purchasing the shares. The ITAT held that the entire loan was borrowed for acquiring shares, and as the shares were not fully allotted, it did not deprive the appellant from claiming the entire interest paid as part of the cost of acquisition. The ITAT directed the Assessing Officer to treat the interest paid as part of the cost of acquisition and allowed it as a deduction. Therefore, Ground No.1 was allowed in favor of the appellant.Issue 2: Levy of interest under section 234DThe appellant did not press Ground No.2 regarding the levy of interest under section 234D, and as a result, it was dismissed as not pressed. Consequently, the appeal was partly allowed by the ITAT.In conclusion, the ITAT ruled in favor of the appellant, allowing the interest paid for acquiring shares to be considered as part of the cost of acquisition under section 48 of the Income Tax Act. The decision highlighted the direct nexus between the borrowed funds and the acquisition of shares, emphasizing that the appellant should be allowed to claim the entire interest paid, irrespective of the full allotment of shares. The dismissal of Ground No.2 regarding the levy of interest under section 234D further contributed to the partial allowance of the appeal.
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