TaxTMI 
TaxTMI 
TaxTMI 
2020 (10) TMI 742
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....ance of interest expenses of Rs. 14,09,635/- while computing income from Long Term Capital Gain without properly appreciating the facts of the assessee's case. 5. The brief facts of the case are that the assessee has filed his return of income electronically on 30.09.2013 declaring total income of Rs. 13,38,20,298/-. Case of the assessee was selected for scrutiny assessment and notice under Section 143(2) of the Act was issued and served upon the assessee. The case of the assessee is that he has been making investments in the purchase of land out of borrowed funds. Interest expenditure incurred on such funds is being capitalized in the investments. On sale of those lands, while computing the capital gain, the assessee used to claim cost of interest expenditure. This claim of the assessee has been disallowed by the Assessing Officer, mainly relying upon the findings of the learned Assessing Officer recorded in Assessment Year 2010-11. The following observations of the learned Assessing Officer in this regard are worth to note:- "In view of all the above facts and on the basis of the disallowance made on the identical issue in AY 2010-11 in the case of the assessee himself as well....
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.... the same before selling. It is seen that both the above conditions are not fulfilled, therefore, the disallowance of interest has been done correctly by the AO." 7. Learned Counsel for the assessee, at the very outset, submitted that in AY 2010-11 the Tribunal has allowed the appeal of the assessee and set aside the findings of the Revenue Authorities. He placed reliance on the order of the Tribunal dated 30.04.2019 in ITA No. 322/Ahd/2015. Learned Departmental Representative, on the other hand, was unable to controvert this contention of the learned Counsel for the assessee. 8. We have duly considered the rival contentions and gone through the record carefully. The Tribunal, in Assessment Year 2010-11, has made following discussions on this issue:- "8. We have duly considered rival contentions and gone through the record carefully. There are two angles of the controversy required to be adjudicated by us. In the first fold, the dispute is whether interest expenditure incurred by an assessee for acquiring the capital assets deserves to be capitalized and on its sale, required to be considered as cost of acquisition for the purpose of computation of capital gain. As far this l....
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....y be part of cost of acquisition. We also find that the case of the assessee is covered by the decision of Pune Bench of the Tribunal in the case of S. Balan alias Shanmugam (129 ITD 869), which is directly on the point as in that case also the issue was regarding allowability of interest as part of cost of acquisition of shares. In that case, the CIT(A) had held that since intention of investment in shares was for earning of dividend and as the said dividend income was exempt from tax, the interest expenditure could not be taken into account in view of the provisions of section 14A. The view taken by the CIT(A) was not accepted by the Tribunal. It was held that since the assessee had borrowed funds for acquisition of shares and interest had been capitalized, interest could not be separated from amount of investment. Thus, it was held that interest liability has to be taken into account towards cost of capital asset for the purpose of computation of capital gain. The case of the assessee is identical. We therefore, respectfully following the decision of the Pune Bench of the Tribunal (supra), see no infirmity in the order of the CIT(A) in allowing capitalization of interest to th....
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....oss account and balance sheet. The assessee has submitted fund flow statement in a summarized manner which has been extracted in the assessment order and noticed by us. A perusal of the balance sheet as on 31.3.2005 loan of Rs. 1,99,000/- against name of Shri Maheshkumar T. Padhiyar is outstanding. Similarly substantial loan liability has been shown at the end of each accounting year i.e. on 31st March, which is reflected in the table reproduced in the assessment order. How the Revenue authorities have appreciated this aspect. It is the dispute between the parties. For example, unsecured loan of Rs. 1,07,69,000/- were taken in the F.Y.2005-06. The outstanding unsecured loans were Rs. 71,69,000/-. The assessee has made investment of Rs. 76,48,447/-. The expectation of the ld.CIT(A) is to demonstrate that loans taken from "A" remains invested in the capital asset. If assessee has taken loan in subsequent year from "B" and repaid the loan of "A", then it will not be construed that borrowed funds were used for the purchase of the assets. It can be explained by way an example viz. the assessee took loan of Rs. 100/- from "A". Made investment in land at Rs. 150/-. He took loan in the....