IN INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ITA No. 1487/Mum/2015 (A Y: 2 007-20 08) SANJEEV RENIWAL (HUF) Vs. ACIT CENTRAL CIRCLE 38 156, Maker Chambers VI, Aayakar Bhavan, 220, Jamnalal Bajaj Marg, Mumbai 400 02 0. Nariman Point, Mumbai 400 021. PAN: AAGHS7465H Appellant .. Respondent Revenue by .. Shri C.S. Sharma (DR) Assessee by .. Shri Reepal G. Tralshawala (AR) Date of hearing 21-09-2016 Date of pronouncement 21-09-2016 ORDER PER MANOJ KUMAR AGGARWAL (AM) : 1. instant appeal has been filed by assessee for Assessment Year [AY] 2007-08 assailing order of Commissioner of Income Tax (Appeals)-41 [CIT(A)], Mumbai dated 14.11.2014 primarily on ground that order passed by assessing officer is in total contradiction to direction of Hon ble ITAT and CIT(A) has grossly ignored/overlooked details furnished by appellant during course of assessment proceedings. 2. Facts in brief, are that assessee is resident HUF and claimed interest expenses of Rs.13,12,705/- against short term capital gains of Rs.27,23,515/-. interest claim of assessee was not allowed by assessing officer and same was confirmed by CIT(A) against which assessee preferred appeal before ITAT vide ITA Nos. 451&457/Mum/10. appeal of assessee was partly allowed vide ITAT order dated 16.03.2011 by issuing following directions:- 7.1 However, we find merit in submission of learned counsel for assessee that since assessee has purchased shares out of borrowings made from Shri Shanti Sarup Reniwal, therefore, at least interest attributable to such script for number of days which was held by assessee should be allowed as deduction. From statement of STCG, we find assessee has calculated interest of Rs.12,81.220. However, such calculation was not before assessing officer or CIT(A). We, therefore, deem it proper to restore matter to file of assessing officer with direction to verify interest so calculated by assessee on basis of utilization of borrowed funds for number of days from date of purchase to date of sale of shares. Needless to say, assessing officer shall afford reasonable opportunity of being heard to assessee by verifying such calculation, copy of which is placed in paper book pages 14 2 ITA No. 1487/Mum/2015 A.Y. 2007-08 & 15. ground raised by assessee on this issue is partly allowed for statistical purpose. Pursuant to above direction of ITAT, fresh assessment order was passed by assessing officer vide order dated 05.10.2012. But deduction of interest expenses was again denied by assessing officer on primacy premises that assessee has failed to prove nexus of utilization of borrowed funds for investment in shares and has failed to comply with directions of Hon ble ITAT, Mumbai in this regard. AO made following observations while denying claim of assessee with respect to deduction of interest expenses:- 6.7 Now, despite giving ample opportunity, assessee is clearly denying establishing nexus of utilization of borrowed funds for investment in shares and thus it is violating directions given by Hon ble ITAT, Mumbai in this regard 6.8 It is also fact that it is assessee only who possesses information with them as to which fund was used by him for what purpose and he is denying such information now to A.O. 6.9 chart of interest computation submitted by assessee does not pertain to borrowed funds being used but only any funds being used for investments. This was not direction given by Hon ble ITAT, Mumbai. 6.10 Thus from above it is clear that assessee has not fulfilled direction of ITAT, Mumbai and it has not provided any computation of interest w.r.t. utilization of borrowed funds for investment in shares. 6.11 Thus, on, on basis of above facts, no deduction of interest expenses can be given to assessee against income from Short-term Capital Gains (STCG) and thus issue is decided accordingly 3. Against same, assessee preferred appeal before CIT(A) but same was dismissed vide order dated 14.11.2014. assessee contended that issue whether amount borrowed for investment in shares can be allowed as cost of acquisition has already been settled in favour of assessee by aforesaid order of ITAT. As no calculation of claim of interest was provided to A.O. during assessment proceedings and with view to verify these calculations, suitable directions were issued by ITAT and therefore, A.O. s action in calling upon appellant to establish nexus between borrowings of funds and its utilization for investments was in clear breach of judicial discipline. It was claimed that Hon ble ITAT, based on documents and submissions had accepted fact about borrowings of funds and its utilization in making investment in shares. It was submitted that A.O. simply had to verify calculation of interest and not to once again ask appellant to prove fact that had already been decided by higher authority with respect to utilization of borrowed funds for purpose of investments. CIT(A) observed that there was nothing to indicate that 3 ITA No. 1487/Mum/2015 A.Y. 2007-08 assessee had demonstrated before Hon ble Tribunal nexus of borrowed funds with scrip- wise investments with help of cogent materials. Further, onus was on assessee to show that shares were acquired from borrowed fund because source of acquisition of shares was within special knowledge of assessee and assessee was under obligation to prove same with help of bank statements, contact notes, brokers account etc. assessee has failed to produce evidence to substantiate its claim and therefore, appeal of assessee was dismissed. Aggrieved by stand of revenue, assessee is again in appeal before us. 4. learned authorized representative [AR] of assessee has raised various contentions in its support and filed various documents including statement of short term capital gains, bank statement as per assessee s books of accounts and correspondences made with lower authorities to substantiate his claim. AR contended that claim of assessee in principle with respect to interest on borrowed capital has already been settled in favour of assessee by early directions of ITAT and lower authorities are only required to verify calculations with respect to number of days for which borrowed capital has been used for purpose of making investments from which short term capital gains have been earned by assessee. learned DR, on other hand has relied upon stand of lower authorities and contended that assessee needs to substantiate its claim with respect to interest on borrowed capital as well as computation thereof. 5. We have heard rival contentions and perused material on record. main dispute in matter is that whether claim of assessee in principal with respect to interest on borrowed capital has been settled by earlier directions of ITAT or not. For this, it would be prudent to reproduce relevant operative part of earlier directions of ITAT which is as follows:- 7.1 However, we find merit in submission of learned counsel for assessee that since assessee has purchased shares out of borrowings made from Shri Shanti Sarup Reniwal, therefore, at least interest attributable to such script for number of days which was held by assessee should be allowed as deduction. From statement of STCG, we find assessee has calculated interest of Rs.12,81.220. However, such calculation was not before assessing officer or CIT(A). We, therefore, deem it proper to restore matter to file of assessing officer with direction to verify interest so calculated by assessee on basis of utilization of borrowed funds for number of days from date of purchase to date of sale of shares 4 ITA No. 1487/Mum/2015 A.Y. 2007-08 (emphasis supplied by us) Hence, earlier bench of tribunal finds merit in claim of assessee with respect to deduction of interest on borrowed funds and as stand has been taken by fellow bench and with view to observe Judicial discipline, we need not delve into issue again on merits and also held same. Therefore, only thing to be verified is factum of utilization of borrowed funds from aforesaid lender and computation of interest for period during which these funds have remain utilized. learned counsel for assessee produced before us statement of short term capital gain and bank ledger and with help of sample entries, demonstrated before us correlation between borrowed funds and investments made in shares. Therefore, for very limited purpose of verification of nexus and computation, matter is again restored back to file of AO to verify claim of assessee on above lines. 6. In nutshell appeal of assessee is allowed for statistical purposes. Order pronounced in open court on 21/09/2016 Sd/- Sd/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 21/09/2016 PS:- Pooja K. Copy of Order forwarded to: 1. Appellant 2. Respondent. 3. CIT (A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER, Assistant Registrar ITAT, MUMBAI Sanjeev Reniwal (HUF) v. ACIT Central Circle-38, Mumbai