AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (7) TMI 1033
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....lenged the appeal on the addition of Rs. 12,77,77,488/- towards the cost of acquisition u/s 48 of the Act, claimed as deduction on account of interest expenses while computing capital gains along with other grounds. 3. The brief facts are that the assessee is engaged in the business of trading and exporting pharmaceutical products, hard gelatine capsule and printed foil. The assessee e-filed its return of income dated 27.11.2014 declaring total income at Rs. (-) 44,22,98,740/- and the return was processed u/s 143(1) of the Act. The assessee case was selected for scrutiny and assessment order dated 13.12.2016 was passed u/s 143(3) of the Act where the total income was determined at Rs. (-) 30,93,67,771/- by making various additions/disallow....
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.... Officer (AO) for the reason that section 48 of the Act enumerates the deduction that are allowable while computing the income chargeable under the head capital gains and it pertains to either transfer of such asset or the cost of acquisition of the asset and the cost of improvement thereto. The AO contends that the interest expenses claim by the assessee does not pertain to any of the deduction mentioned in the provision of section 48 of the Act and that the said expenditure pertains to the holding costs of the asset and not for the cost of acquisition u/s. 48 of the Act. The AO further stated that the said interest was not expended for acquisition of capital asset or for transfer of the same. The AO disallowed the impugned amount and calc....
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....ing of the asset and not for the acquisition of the asset for the reason that the interest was paid by the assessee to the bank subsequent to the purchase of the units of mutual funds. The learned DR relied on the decision of the Co-ordinate Bench in the case of V. Mahesh, ITO- 14 (2)(3) Vs. Shri Vikram Sadanand Hoskote, (2007) 18 SOT 130 (Mum) and also relied on the decision of Ms. Deepti Singh Arora Vs. ACIT, 19 (1), Mumbai (2014) 49 taxmann.com 567 (Mum-Trib.). 8. We have heard the submissions made by rival sides and perused the material available on record. It is evident that the assessee has obtained loan from IIFL and Kotak bank for the purpose of purchasing units of mutual funds. The assessee is said to have claimed the interest pai....
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....ein it was held that the interest paid on borrowed funds availed for the acquisition of shares amounted to the cost of share and was held to be cost of acquisition of shares. It was stated that the said interest should be included in the cost of the acquisition for which the assessee was entitled to deduction u/s 48 of the Act. The relevant extract of the said decision is cited hereunder for ease of reference: "In respect 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 of the character of cost of share and, therefore, the same was rightly capitalised along with the cost of acquisition....
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....ble to the facts of the present case and does not have reliance for the issue in hand. From the above observation, we are of the considered view that various High Courts have held that the interest incurred on borrowed funds are to be treated as 'cost of acquisition' and deduction u/s 48 of the Act was allowed for the said expenditure. By respectfully following the said decisions, we hereby allow the claim of the assessee. 10. In the result, grounds nos. 1,2 and 3 raised by the assessee are allowed. 11. Ground nos. 4, 5 and 6 pertains to the addition of Rs. 14,26,898/- towards interest paid from escrow account by not considering the fact that the said interest does not pertain to the assessee and was towards reimbursement. It is observed ....
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....said reimbursement. The learned AR controverted the submission of the AO that details pertaining to impugned amount were not furnished before the AO. The learned DR controverted the same and stated that the assessee has not submitted required documentary evidence to substantiate its claim. 13. We have heard the submissions made by rival sides and perused the material available on record. We are of the considered opinion that this issue raised by the assessee requires verification of the documentary evidence relied on by the assessee. For this purpose, we remand this issue back to the learned AO for verifying the relevant documents relied on by the assessee. 14. In the result, ground nos. 4, 5 and 6 are allowed for statistical purpose. 15....