May 2008
Capital gain : Interest on borrowing for investment in shares to be added to cost of acquisition of shares
By K. B. Bhujle, Advocate
Reading Time 2 mins
New Page 4
15 Capital gains : cost of acquisition : A.Y. 2000-01 :
Interest on capital borrowed for investment in shares is liable to be added to
the cost of acquisition of shares.
[CIT v. Trishul Investments Ltd., 215 CTR 96 (Mad.)]
The assessee company was carrying on business of investment
in shares and securities. In the books of the assessee company, the interest
liability on the borrowed funds was debited. The assessee claimed that the
interest should be included in the cost of acquisition of the shares. The
Assessing Officer rejected the claim. The Tribunal allowed the claim.
On appeal by the Revenue, the Madras High Court upheld the
decision of the Tribunal and held as under :
“(i) The Tribunal correctly held that the interest paid for
acquisition of shares would partake character of cost of share and therefore
the same was rightly capitalised along with the cost of acquisition of shares.
There is no denial regarding the borrowed money for the acquisition of shares
by the assessee. The Tribunal correctly held that the interest payable thereon
should be added to the cost of acquisition of shares. The reasons given by the
Tribunal are based on valid materials and evidence.
(ii) Under these circumstances, we do not find any error or
legal infirmity in the order of the Tribunal so as to warrant interference.”
