ITO Vs Gaurav Karnawat HUF (ITAT Jaipur)
₹60-Crore IPO Bid, ₹2.58-Crore Allotment &; ₹16.44-Lakh Interest: Direct Financing Cost Joins Cost of Shares u/s 48
Capital Loss Draws Reassessment
The assessee-HUF filed its original return declaring total income of ₹2,77,650. It also disclosed aggregate long-term & short-term capital losses from equity transactions amounting to ₹86,04,002.
The Revenue subsequently formed the view that the assessee had inflated its capital loss by ₹16,44,724, representing interest paid on borrowings utilised for applying for shares in an IPO. Proceedings were accordingly reopened u/s 147.
In the return filed in response to notice u/s 148, the assessee excluded the disputed interest component from its capital-loss computation. The AO did not draw any further adverse inference on the quantum but computed the total loss at ₹69,59,277 & proposed initiation of penalty proceedings u/s 270A for under-reporting of income.
The assessee challenged the reassessment & the exclusion of interest from the cost of shares before the CIT(A)/NFAC.
₹60-Crore IPO Application Financed Through Loan
The assessee had applied for shares in the IPO of SBI Cards for approximately ₹60 crore. The application was financed primarily through a loan obtained from Motilal Oswal Finvest Ltd.
Against the substantial application amount, shares worth only ₹2,58,50,445 were allotted. The balance application money was refunded, following which the loan was repaid together with interest of ₹16,44,724.
