Lalith Kumar, Bangalore v. ITO, Bangalore

ITA 980/BANG/2009 | 2005-2006
Pronouncement Date: 16-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 98021114 RSA 2009
Assessee PAN BELOW1000S
Bench Bangalore
Appeal Number ITA 980/BANG/2009
Duration Of Justice 3 month(s) 20 day(s)
Appellant Lalith Kumar, Bangalore
Respondent ITO, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 16-02-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 16-02-2010
Date Of Final Hearing 02-02-2010
Next Hearing Date 02-02-2010
Assessment Year 2005-2006
Appeal Filed On 26-10-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI K.P.T. THANGAL VICE PRESIDENT AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NO.980/BANG/2009 ASSESSMENT YEAR : 2005-06 SRI LALITH KUMAR NO.19 SEPPINGS ROAD BANGALORE 560 001. : APPELLANT VS. THE INCOME TAX OFFICER WARD 1(2) BANGALORE. : RESPONDENT APPELLANT BY : SHRI H.N. KHINCHA RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI O R D E R PER A. MOHAN ALANKAMONY ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.CIT(A)-I BANGALORE FOR THE ASSESSMENT YEAR 200 5-06. 2. THE ASSESSEE HAS IN FACT RAISED SEVEN GROUNDS WHICH ARE EXHAUSTIVE AND ELABORATE IN NATURE. ON A PERUSAL GROUND NOS: 1 2 AND 7 BEING GENERAL AND NO SPECIFIC ISSUES INVOLVED THEY ARE TREATED AS NON- CONSEQUENTIAL. IN THE REMAINING GROUNDS THE SUBST ANCES OF THE ISSUES RAISED ARE REFORMULATED AS UNDER: ITA NO.980/BANG/09 PAGE 2 OF 10 (I) THE LOWER AUTHORITIES HAVE ERRED IN ALLOWING ONLY T HE INTEREST PERTAINING TO SHARES ALLOTTED AS AGAINST TOTAL SHAR ES APPLIED AS A DEDUCTION WHILE COMPUTING CAPITAL GAINS; (II) THE ASSESSEE DENIES LIABLE TO BE CHARGED INTEREST U /S 234A 234B AND 234C OF THE ACT. 3. THE FACTS OF THE ISSUE IN BRIEF ARE THAT THE ASSESSEE AN INDIVIDUAL DERIVES INCOME FROM SALARY AND FROM OTHER SOURCES . THE ASSESSEE HAD CALCULATED A STCG OF RS.38519/- AND SET OFF THE SAM E AGAINST BROUGHT FORWARD THE LOSS ON CG FOR THE AY 2004-05 AND ARRIV ED AT RS.NIL STCG. WHILE CALCULATING CG THE ASSESSEE HAD SET OFF INTE REST OF RS.511124 PAID TO ILFS. ON BEING QUERIED THE ASSESSEE HAD FURNIS HED A REVISED RETURN ADMITTING AN INCOME OF RS.282447/- WITH A PLEA THAT HE HAD WRONGLY CLAIMED INTEREST PAID TO ILFS TOWARDS FUNDING OF PU NJAB NATIONAL BANK SHARES AS THE SAID SHARES WERE NOT SOLD IN FY 2004- 05 AND CLAIMED INTEREST OF RS.281381 AS DEDUCTION WHILE COMPUTING INCOME FR OM STCG. AFTER CONSIDERING THE ASSESSEES EXPLANATION AND FOR THE REASONS SET-OUT IN THE IMPUGNED ORDER THE AO HAD OBSERVED THAT IN THE PRESENT CASE IF NO SHARES WERE ALLOTTED THE ASSESSEE WAS NOT ELIGIBLE TO CLAIM ANY INTEREST AS THE ASSESSEE IS DECLARING INCOME OF CG AND NOT INCO ME FROM BUSINESS. HENCE THE ASSESSEE WAS ELIGIBLE TO CLAIM ONLY TOWA RDS SHARES ALLOTTED AND THUS DISALLOWED THE EXCESS INTEREST CLAIMED AT RS. 271742/-. 4. AGITATED THE ASSESSEE HAD APPROACHED THE LD.CIT (A) FOR RELIEF. AFTER DUE CONSIDERATION OF THE LENGTHY SUBMISSIONS OF THE ASSESSEE COUPLED WITH VARIOUS CASE LAWS THE LD. CIT (A) WAS OF THE VIEW THAT 6.2I HOLD THAT THE EXPENDITURE INCURRED TOWARDS PAYMENT OF INTEREST ON THE LOAN AMOUNT CONCERNING THE NUMBER O F NON-ALLOTTED ITA NO.980/BANG/09 PAGE 3 OF 10 SHARES ARE THOUGH RELATED HAS NO DIRECT NEXUS WITH THE NUMBER OF ALLOTTED SHARES AND COST OF ACQUISITION IS ALWAYS S PECIFIC TO A CAPITAL ASSET ACQUIRED OR OWNED AND HAS NO CONCERN WHATSOEV ER WITH ANY CAPITAL ASSET NOT ACQUIRED OR OWNED. THE SHARES T HOUGH APPLIED BUT NOT ALLOTTED FALL IN THE CATEGORY OF ASSETS NOT ACQ UIRED AND NOT OWNED. THEREFORE I FIND IT IS JUSTIFIED ON THE PART OF TH E AO TO DISALLOW THE RELATED AMOUNT OF INTEREST PAID FOR THE NON-ACQUIRE D ASSETS.. 5. AGGRIEVED WITH THE FINDING OF THE CIT(A) THE AS SESSEE HAS COME UP WITH THE PRESENT APPEAL. THE LD. A.RS SUBMISSION WAS MORE OR LESS ON THE LINE WHICH WAS PUT-FORTH BEFORE THE FIRST APPEL LATE AUTHORITY. IN FURTHERANCE IT WAS CONTENTED THAT (I) THE INTEREST WAS ON LOAN BORROWED EXCLUSIVELY FOR A CQUISITION OF SHARES; (II) IRRESPECTIVE OF THE NUMBER OF SHARES ALLOTTED THE INTEREST ON LOAN FOR APPLICATION OF SUCH SHARES IS INCURRED AUT OMATICALLY AS A COMPULSION; (III) THE INTEREST ON LOAN WAS INCURRED IN CONNECTION WIT H THE APPLICATION OF SHARES AND APPLICATION PRECEDES ALLO TMENT AND THERE WAS NO WAIVER OF INTEREST ON SHARES BEING SHO RT-ALLOTTED AS COMPARED TO THE NUMBER OF SHARES APPLIED; & (I) THE LOWER AUTHORITIES HAVE ERRED IN PROPORTIONING T HE INTEREST PAID ON ACQUISITION OF SHARES ON THE BASIS OF SHARE S ALLOTTED AS AGAINST SHARES APPLIED. 5.1. DURING THE COURSE OF HEARING THE LD. A R HAD FURNISHED A PAPER BOOK CONTAINING 1 24 PAGES WHICH CONSISTS OF INT ER ALIA COPIES OF (I) WRITTEN SUBMISSIONS MADE BEFORE THE CIT(A) LETTER OF IL & FS LTD. ETC. 5.2. ON THE OTHER HAND THE LD. D.R WAS FIRM IN HER URGE THAT THE AUTHORITIES BELOW HAVE WISELY DELIBERATED THE ISSUE AND CAME TO THE CONCLUSION THAT THE ASSESSEE WAS NOT ENTITLED TO CL AIM DEDUCTION OF INTEREST ON THE ENTIRE SUMS BORROWED. IT WAS THEREFORE PL EADED THAT THE FINDINGS OF THE AUTHORITIES BELOW BE SUSTAINED. ITA NO.980/BANG/09 PAGE 4 OF 10 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS DULY PERUSED THE RELEVANT RECORDS AND ALSO THE PAPER BOOK FURNIS HED BY THE LD. A R IN THE FORM OF EVIDENCE. 6.1. THE CRUX OF THE ISSUE IS THAT WHETHER THE ENTIRE INTEREST CLAIMED AS DEDUCTION WAS ALLOWABLE OR ONLY INTEREST PAID TOWAR DS ACQUISITION OF ASSETS ONLY? 6.2. LET US NOW ANALYZE THE PROS AND CONS OF THE IS SUE. BRIEFLY THE ASSESSEE HAD ENTERED INTO AN AGREEMENT OF MARGIN MONEY SCHEME WHICH WAS BEING OFFERED BY THE FINANCIAL SERVICES COMPANIES A ND IN THE INSTANT CASE IL&FS - WHICH FACILITATES PAYMENT OF SHARE APPLICA TION MONEY ON BEHALF OF THE CLIENT (THE ASSESSEE). THE NUMBER OF SHARES TO BE APPLIED FOR WERE DETERMINED AND IL&FS PROVIDES THE LOAN(S) REQUIRED FOR SHARE APPLICATION AND PAYS THE APPLICATION MONEY DIRECTLY TO THE BOOK RUNNER ON BEHALF OF THE CLIENT AND THE COMPANY IN TURN COLLECTS THE MARGIN MONEY FROM THE CLIENT AS A SECURITY FOR THE LOAN ADVANCED. IN CASE OF OVERS UBSCRIPTION FOR THE SHARES APPLIED FOR THE CLIENT GETS SHARES NOT FOR THE FUL L AMOUNT SUBSCRIBED BUT LESS AND THAT THE EXCESS APPLICATION MONEY PAID WOU LD BE REFUNDED. HOWEVER INTEREST WOULD BE COMPUTED ON THE LOANS AD VANCED BY IL&FS. THE CONTENTION OF THE ASSESSEE IS THAT THE INTEREST PAYABLE ON A TRANSACTION DOES NOT DEPEND ON NUMBER OF SHARES ALLOTTED BUT ONLY ON NUMBER OF SHARES APPLIED. HOWEVER THE STAND OF THE AO THAT THE COST OF ACQUISITION IS INTEREST IN PROPORTION TO SHARES ALLOTTED AND NOT I NTEREST TOWARDS THE ENTIRE SHARES APPLIED. 6.3. LET US HAVE A GLIMPSE OF WHAT S.48 SAYS? S.48. THE INCOME CHARGEABLE UNDER THE HEAD CAPIT AL GAINS SHALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE C ONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET THE FOLLOWING AMOUNTS NAMELY:- (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH SUCH TRANSFER; ITA NO.980/BANG/09 PAGE 5 OF 10 (II) THE COST OF ACQUISITION OF THE ASSET AND THE COST O F ANY IMPROVEMENT THEREOF : 6.4. IN A CAREFUL READING OF THE SAID SECTION IT E MERGES THAT THE COST OF ACQUISITION OF THE ASSET SHALL BE DEDUCTED FOR THE PURPOSE OF CAPITAL GAINS. IN THE CASE ON HAND THE ASSESSEE FOR THE A CQUISITION OF ASSET (SHARES) HE HAD ENTERED INTO AN AGREEMENT WITH IL&F S MARGIN MONEY SCHEME ACCORDING TO WHICH IL&FS PROVIDED THE REQ UIRED FUNDS FOR SHARE APPLICATION (AS PER THE NUMBER OF SHARES APPLIED FO R) AND THE SAME WOULD BE PAID TO THE BOOK RUNNER DIRECTLY ON BEHALF OF TH E ASSESSEE. ON THE BASIS OF THE ALLOTMENT OF SHARES THE EXCESS APPLICATION MONEY PAID BY IL&FS WOULD BE REFUNDED IF THE ALLOTMENT OF SHARES WERE LESS THAN THE NUMBER OF SHARES APPLIED FOR. HOWEVER INTEREST WOULD BE COM PUTED BY IL&FS ON THE BASIS OF LOAN ADVANCED TO THE ASSESSEE FOR SUCH TR ANSACTIONS. AS A MATTER OF FACT THE ASSESSEE HAD AVAILED THE LOAN TO SUBSC RIBE FOR THE NUMBER OF SHARES AS DETERMINED AND IL&FS HAD PAID THE ENTIRE AMOUNT FOR THE NUMBER OF SHARES APPLIED BY THE ASSESSEE AT THE TIM E OF SUBMITTING APPLICATION FOR ALLOTMENT. FOR HAVING AVAILED THE LOAN FOR APPLYING OF SHARES THE ASSESSEE WAS OBLIGED TO PAY INTEREST FO R THE ENTIRE LOAN AVAILED FOR IRRESPECTIVE OF NUMBER OF SHARES ALLOTTED FINA LLY. CONSIDERING THE FACTS OF THE CASE WE ARE OF THE CO NSIDERED VIEW THAT THE CONTENTIONS OF THE ASSESSEE THAT THE INTEREST PAYAB LE ON A TRANSACTION DOES NOT DEPEND ON A NUMBER OF SHARES FINALLY ALLOTTED BUT ON A NUMBER OF SHARES INITIALLY APPLIED FOR COMMANDS WORTH CONSIDE RATION. ITA NO.980/BANG/09 PAGE 6 OF 10 6.5. WE HAVE ALSO PERUSED THE CASE LAWS ON WHICH T HE ASSESSEE HAD PLACED RELIANCE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. (I) CIT V. V.K.RAJA GOPALA RAO - 252 ITR 459 (MAD ): THE ISSUE BEFORE THE HONBLE COURT WAS THAT THE ASSESSEE WHO WAS CA RRYING ON THE BUSINESS OF RUNNING A HOTEL DURING THE AYS 73-74 A ND 74-75 RECEIVED CG ON THE SALE OF PROPERTY WHICH HE HAD PURCHASED FO R RS.5 45 349 IN 1970. ON THE SAME DAY HE HAD MORTGAGED THE PROPERTY TO S ECURE A LOAN OF RS.4 00 000 WHICH LOAN HAD BEEN RAISED SOLELY FOR T HE PURPOSE OF PAYING HIS VENDOR AND FOR MEETING THE COST OF THE STAMP DU TY ON THE SALE DEED. THE ISSUE WAS WHETHER HAVING REGARD TO THE PROVISIONS OF SECTION S 48 AND 55(2) OF THE INCOME-TAX ACT 1961 THE TRIBUNAL WA S RIGHT IN HOLDING THAT THE MORTGAGE EXPENSES INCURRED IN CONNECTION WITH THE A CQUISITION OF THE PROPERTY AND THE INTEREST PAYABLE ON THE MORTGAGED AMOUNTS WHICH HAVE BEEN UTILIZED AS PART OF THE CONSIDERATION WOULD F ORM PART OF THE COST OF ACQUISITION OF THE PROPERTY FOR THE PURPOSE OF COMP UTATION OF CAPITAL GAINS IN THE ASSESSEE'S CASE ? IT WAS RULED THAT COST OF ACQUISITION TO THE ASSESSEE WAS NOT MERELY THE AMOUNT THAT HE HAD PAID TO THE VENDORS BUT ALSO THE COST OF THE BORROWING MADE BY HIM FOR THE PURPOSE OF PAYING THE VENDOR AN D OBTAINING THE SALE DEED. THE FACT THAT THE MORTGAGE WAS EXECUTED AFTER THE SALE DEED WAS OBTAINED EVEN THOUGH BOTH THE DOCUMENTS WERE SIGNED AND REGISTERED ON THE SAME DAY DOES NOT RENDER THE MORTGAGE AND THE BORR OWING MADE THERE- UNDER IRRELEVANT TO THE TASK OF DETERMINING THE COS T OF ACQUISITION. WITHOUT THE MONEY BORROWED THE ASSESSEE WOULD NOT HAVE BEE N IN A POSITION TO BUY THE PROPERTY. THE PURCHASE NOT HAVING BEEN MADE WIT H HIS OWN FUNDS HE WAS REQUIRED TO PAY INTEREST FOR THE BORROWED FUND AND SECURE THE BORROWING BY CREATING A MORTGAGE. SUCH MORTGAGE COULD NOT HAV E BEEN CREATED EARLIER AS HE HAD TO FIRST ACQUIRE TITLE BEFORE ENCUMBERING THE SAME. PAYMENT OF CONSIDERATION FOR THE SALE INDISPUTABLY HAVING BEEN MADE WITH THE BORROWED FUNDS THE BORROWING DIRECTLY RELATED TO THE ACQUIS ITION AND INTEREST PAID THEREON WOULD FORM PART OF THE COST OF ACQUISITION. WITH DUE RESPECTS WE WOULD LIKE TO POINT OUT THAT IN THE ABOVE CASE THE ASSESSEE HAD BORROWED THE MONEY FOR PAYING THE DUES TO THE VENDORS AS ITA NO.980/BANG/09 PAGE 7 OF 10 WELL AS TO THE SALE DEED. LIKEWISE IN THE CASE ON HAND THE ASSESSEE HAD CLAIMED INTEREST FOR THE LOAN AVAILED EXCLUSIVELY F OR ACQUISITION OF SHARES IRRESPECTIVE OF THE NUMBER OF SHARES FINALLY ALLOTT ED AS THE ASSESSEE WAS OBLIGED TO PAY INTEREST ON THE LOAN AVAILED FOR THE SUBSCRIPTION OF SHARES AT THE TIME OF SUBMISSION OF APPLICATION ITSELF. THE RATIO LAID DOWN BY THE HONBLE COURT IS SQUARELY APPLICABLE TO THE ISSUE O N HAND. (II) CALCUTTA ELECTRIC SUPPLY CORPORATION LTD. V. ADDL. CIT 136 ITR 777 (CAL) : THE ISSUE BEFORE THE HONBLE COURT WA S WHETHER THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE ADDITIONAL COMMISSIONER OF INCOME- TAX LEGALLY INVOKED THE PROVISIONS OF SECTION 263(1) OF THE INCOME-TAX ACT 1961 AND WHETHER HAVING REGARD TO THE FACT THAT THE ASSESSEE IS A STERLING COMPANY MAINTAINING ACCOUNTS IN POUND STERLING THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE WRITTEN DOWN VALUE OF THE FIXED ASSETS SHOULD BE DETERMINED ON THE BASIS OF THE RATE OF EXCHANGE WITH REFERENCE TO THE DATE OF CONTRACT OR THE DATE OF DELIVERY OR THE DATE OF PAYMENT FOR THE ASSESSMENT YEARS 1967-6 8 1968-69 1969-70 AND 1970-71 ? ON THE FACE OF IT THE ABOVE RULING OF THE HONBLE COURT DOESNT FIT IN TO THE ISSUE ON HAND AND HENCE DISTINGUISHABLE. (III) COMMISSIONER OF INCOME-TAX K II V. MAITHRE YI PAI 152 ITR 247 (KAR) : IT WAS RULED THAT THE INTEREST ON BORROWING FOR PURCHASE OF SHARES WA S ALREADY ALLOWED AS A DEDUCTION UNDER S. 57 IN COMPU TING INCOME FROM DIVIDENDS. WHETHER THE SAME INTEREST CAN CONSTITUTE PART OF THE COST OF ACQUISITION OF THE SHARES FOR PURPOSES OF CAPITAL G AINS ON THE SHARES? MATTER REMANDED BACK TO THE TRIBUNAL TO DETERMINE WHETHER THE DEDUCTION WOULD AMOUNT TO DOUBLE DEDUCTION. IN THE ABOVE RULING THE HONBLE COURT HAS MADE IT CLEAR THAT THE INTEREST ON BORROWING FOR PURCHASE OF SHARES HAS ALREADY BEEN A LLOWED AS A DEDUCTION U/S 57 OF THE ACT WHILE COMPUTING THE INCOME FROM D IVIDENDS AND REMITTED THE ISSUE BEFORE THE TRIBUNAL TO VERIFY WHETHER THE INTEREST CONSTITUTES PART ITA NO.980/BANG/09 PAGE 8 OF 10 OF THE COST OF ACQUISITION OF THE SHARES FOR PURPOS ES OF CG ON THE SHARES AND THUS IN OUR CONSIDERED VIEW THE ISSUE BEFORE THE HONBLE COURT WAS ON THE DIFFERENT CONTEXT WHICH HAS NO RELEVANCE TO THE ISSUE ON HAND. 6.6. IT COULD BE SEEN FROM THE FACTS OF THE CASE TH AT HAD THE ASSESSEE NOT APPLIED FOR LARGER NUMBER OF SHARES HE COULD NO T HAVE OBTAINED SUCH EXTENT OF SHARES SO ALLOTTED. NORMALLY WHEN SHARES ARE APPLIED FOR LARGER NUMBERS ALLOTMENT WILL ALSO BE PROPORTIONATELY LAR GER. IN THE EVENT OF OVER SUBSCRIPTION OF SHARES SHARES ARE ALLOTTED IN PROP ORTION TO NUMBER OF SHARES APPLIED FOR WITH AN UPPER LIMIT FOR ALLOTMEN T. DUE TO THESE FACTORS PRUDENT INVESTOR OF SHARES APPLIES FOR LARGE NUMBER OF SHARES BY DEPLOYING MORE FUNDS IN ORDER TO OBTAIN MAXIMUM ALLOTMENT. T HEREFORE IT IS QUITE OBVIOUS THAT THE FINANCIAL CHARGES INCURRED ON SUCH DEPLOYMENT OF FUNDS FOR OBTAINING MAXIMUM ALLOTMENT OF SHARES HAS TO BE APP ORTIONED TO THE COST OF ACQUISITION OF THE ALLOTTED SHARES. THIS FUNDAMENT AL PRINCIPLE OF COSTING IS BROUGHT OUT BY THE FOLLOWING HYPOTHETICAL ILLUSTRAT ION. NORMS FOR ALLOTMENT OF SHARES TOTAL NUMBER OF SHARES TO BE ALLOTTED :- 1 00 000 EQUITY SHARES OF RS.10 EACH SHARE APPLICATION MONEY TO BE REMITTED FOR ONE SHAR E:- RS.4/- PER SHARE. TOTAL SUBSCRIPTION FOR SHARES RECEIVED:- 10 00 000 EQUITY SHARES. ALLOTMENT PLAN ALLOTMENT OF SHARES FOR SUBSCRIBERS BELOW 1000 SHARES : - NIL. ALLOTMENT OF SHARES FOR SUBSCRIBERS ABOVE 1000 SHARES BE LOW 5000 SHARES: 100 SHARES ALLOTMENT OF SHARES FOR SUBSCRIBERS ABOVE 5000 SHARES BE LOW 7000 SHARES:- 200 SHARES ALLOTMENT OF SHARES FOR SUBSCRIBERS ABOVE 7000 SHARES BE LOW 9000 SHARES :- 300 SHARES ITA NO.980/BANG/09 PAGE 9 OF 10 ALLOTMENT OF SHARES FOR SUBSCRIBERS ABOVE 9000 SHARES BE LOW 10 000 SHARES:- 400 SHARES ALLOTMENT OF SHARES FOR SUBSCRIBERS ABOVE 10 000 SHARE S:- 500 SHARES. WHEN THE PLAN OF ALLOTMENT OF SHARES IS SUCH ONE H AS TO APPLY FOR MORE THAN 10 000 SHARES TO GET AN ALLOTMENT OF 500 SHARES. HENCE IT WOULD BE PRUDENT FOR AN INVESTOR TO APPLY FOR SAY 11 00 0 SHARES TO OBTAIN ALLOTMENT FOR 500 SHARES. THEREFORE THE SHARE APPL ICATION MONEY TO BE REMITTED WILL BE RS.44 000 (11 000 X 4). THE COMPA NY SHALL RETAIN RS.5 000 BEING THE COST OF SHARES ALLOTTED I.E. 500 X 10 AND THE BALANCE AMOUNT OF RS.39 000 SHALL BE REFUNDED. THE FINANCI AL CHARGE ON RS.44 000 WORKED OUT AT 18% P.A. WILL BE RS.1 980 (44 000 X 1 8/100 X 4/12) ASSUMING THE FINANCIAL CHARGE TO BE FOR A PERIOD OF FOUR MONTHS. THEREFORE IT FOLLOWS THAT THE COST OF 500 SHARES WILL BE RS.5 000 + RS.1 980 = RS.6 980. IT WILL BE ABSURD TO HOLD THAT THE COST OF 500 SHA RES WILL BE RS. 5000 + 120 (500 X 4 X 18/100 X 4/12) BEING FINANCIAL CHA RGE ON 500 SHARES BECAUSE HAD THE INVESTOR APPLIED FOR ONLY 500 SHARE S HE WOULD NOT HAVE BEEN ALLOTTED WITH ANY SHARE AS PER THE SHARE ALLOT MENT PLAN. IT IS ESSENTIAL FOR THE INVESTOR TO APPLY FOR MORE THAN 10 000 SHAR ES IN ORDER TO PROCURE 500 SHARES. HENCE THE FINANCIAL CHARGE INCURRED ON THE ENTIRE INVESTMENT HAS TO BE CHARGED TO THE COST OF ACQUISITION OF THE 500 SHARES ALLOTTED. 6.7 THE CASE IN HAND BEFORE US IS SOMEWHAT SIMILAR TO THE ILLUSTRATION CITED ABOVE. THEREFORE IN AN OVERALL CONSIDERATIO N OF THE FACTS AND CIRCUMSTANCES OF THE ISSUE AND IN CONFORMITY WITH T HE FINDING OF THE HONBLE ITA NO.980/BANG/09 PAGE 10 OF 10 HIGH COURT OF MADRAS REFERRED SUPRA WE ARE OF THE FIRM VIEW THAT THE AO WAS NOT JUSTIFIED IN RESTRICTING THE INTEREST IN PROPORTION TO THE S HARES ACQUIRED BY THE ASSESSEE BUT OUGHT TO HAVE ALLOWED THE ENTIRE INTEREST PERTAINING TO THE TOTAL SHARES APPLIED AS COST OF A CQUISITION FOR THE SHARES ALLOTTED. IT IS ORDERED ACCORDINGLY. 7. THE OTHER GRIEVANCE OF THE ASSESSEE BEING CHAR GING OF INTEREST U/S 234A 234B AND 234C OF THE ACT WHICH A RE MANDATORY AND CONSEQUENTIAL IN NATURE AND AS SUCH THIS GROUND IS DISMISSED AS NOT MAINTAINABLE. 8. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF FEBRUARY 2010. SD/- SD/- (K.P.T. THANGAL ) (A. MOHAN ALANKAMONY ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE DATED THE 16 TH FEBRUARY 2010. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.