Case Law Details
JPR Investments and Trading Private Limited Vs ACIT (ITAT Mumbai)
The case of JPR Investments and Trading Private Limited vs ACIT, adjudicated by the ITAT Mumbai, revolves around the treatment of interest costs incurred for investing in shares. The ITAT directed the re-calculation of Short Term Capital Gains (STCG) from shares, stating that interest expenses cannot be claimed as business expenditure when borrowed funds are utilized for share investments.
The appellant, JPR Investments, declared INR 5,05,38,690 as income from the sale of securities, treating it as short term capital gains in their return of income for A.Y. 2016-17. However, the assessing officer (AO) contested this classification, arguing that the borrowed funds used for purchasing shares should be considered an “Adventure in the nature of trade.”
The ITAT reviewed the case, considering the nature of the transactions and the appellant’s intent. It found that the shares were purchased as investments, not for trading purposes. The appellant had shown the gains from the sale of shares as short term capital gains and had a history of similar transactions treated as such in previous years.
Furthermore, the ITAT noted that the interest expenses claimed by the appellant were incurred on the borrowed funds used for purchasing shares, not for conducting business activities. Therefore, it ruled that these interest costs couldn’t be considered as business expenditure.
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