TaxTMI 
TaxTMI 
2007 (7) TMI 429
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....nt prays that the order of the CIT(A) on the above ground(s) be set aside and the order of the Assessing Officer be restored. 2. Briefly stated, the facts are these. The assessee is a Chartered Accountant. Apart from the professional work, he had purchased shares on 22-5-1998, of Orient Information Technology Ltd., out of the borrowed funds of Rs. 59,45,000 received from Ketan Sheth & Co. According to the assessee, all these shares agreed to be sold to certain parties. Since these parties could not make the payments, the assessee did not deliver the shares. It was only in February, 1999, that payments were received from those parties, and from the sale proceeds of shares the amount of loan was repaid to Ketan Sheth & Co., along with inte....
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....ved sale proceeds earlier and utilised the said proceeds for some other purpose, till February 1999, and hence, such interest was disallowable." 4. Reliance was also placed on the decision of Kerala High Court in the case of Shri K.N. Narayanan v. ITO [1983] 145 ITR 373 and in the case of Rajgiri Rubber & Produce Co. Ltd. v. CIT [1993] 203 ITR 663 (Ker.) as well as on the board Circular No. 704, dated 28-4-1995 for the proposition that where the transactions took place directly between the parties and not through the Stock Exchange, the date of contract of sale as declared by the parties shall be treated as the date of transfer, provided it is followed up by actual delivery of shares and the transfer deeds. In view of the same it w....
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....one month, without giving logical and cogent reason for the same. Accordingly, I hereby direct the Assessing Officer to deduct the entire interest of Rs. 9,64,556 while working the S.T.C.G. on sale of shares, and thereby delete the addition made of Rs. 8,57,383." Aggrieved by the same, the revenue is in appeal before the Tribunal. 5. The learned DR has contended before us that deductions have to be allowed only to the extent it is provided under the statute. According to her, section 48 provides the procedure for computing the capital gains. As per this section what is allowed as deduction is either the cost of acquisition or the cost of improvement or the expenditure incurred wholly and exclusively in connection with such transfer. T....
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....ain is provided in section 48 of the Act. According to this section, the only deductions which are allowable are - (1) the cost of acquisition of the asset, (2) the cost of any improvement thereto and (3) expenditure incurred wholly and exclusively in connection with the transfer of the asset. The cost of acquisition, in our opinion, means the amount paid for acquiring the asset. Once the asset is acquired, then any expenditure incurred thereafter cannot be considered as the cost of acquisition, since such expenditure would not have any nexus with the acquisition of the asset. Wherever the Legislature intended to allow such expenditure as deduction, it had specifically provided so under various heads. For example, in computing the income fr....
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....t deduction on account of interest paid on borrowed funds is allowable as deduction in computing the income under the head 'Income from other sources', even where the dividend is not received in a particular year. If this is the legal position, then we are afraid, how the interest paid by the assessee can be considered as part of the cost of acquisition of the shares. If the contention of the assessee is accepted then it would amount to allowing double deduction i.e., under section 57 as well as under section 48 of the Act, which can never be the intention of the Legislature. As already stated, the double deduction is prohibited as laid down by the Hon'ble Supreme Court in the case of Escorts Ltd. (supra). The entire scheme of the Act, ther....
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....ould be necessary to ascertain the connotation of the expression, in accordance with the normal rules of accountancy prevailing in commerce and industry. The accepted accountancy rule for determining cost of fixed assets is to include all expenditure necessary to bring such assets into existence and to put them in working condition. In case money is borrowed by a newly started company which is in the process of constructing and erecting its plant, the interest incurred before the commencement of production on such borrowed money can be capitalised and added to the cost of the fixed assets. A bare look at the above observations reveals that actual cost would include all expenditure necessary to bring the assets into existence and put them....