TaxTMI 
TaxTMI 
2011 (7) TMI 1160
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....see had purchased 1,20,000 shares of GTL in F.Y. 1999-00 for consideration of ₹ 1,10,31,400/-. Consideration had been paid out of borrowed funds on which assessee had paid interest in the subsequent two years which had been added to cost of acquisition while computing capital gain. The Assessing Officer observed that interest on borrowings had been paid after purchase of shares and capitalization of interest was not in accordance with accounting standards and therefore, he did not allow capitalization of interest. In appeal, CIT(A) observed that there was no dispute that borrowings had been used for repayment of creditors for purchase of shares, as the shares had been purchased on credit. He referred the judgment of Hon'ble Karnataka ....
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....mitted that interest could not be capitalized as same can be allowed only while computing income from other sources received from the investment. 5. We have perused the records and considered the rival contentions carefully. The dispute is regarding capitalization of interest paid on borrowings for acquisition of shares while computing capital gain from sale of shares. There is no dispute that the shares had been acquired from borrowed funds. The dispute is whether interest on borrowings can be added to the cost of acquisition of shares. We find that similiar situation had been considered by the Hon'ble Delhi High Court in the case of CIT vs. Mithilesh Kumari (92 ITR 9) in which the Hon'ble High Court held that interest paid on borrowings ....