No tax relief on interest on loans taken for buying shares

NEW DELHI: Investors who buy shares with borrowed money from institutions cannot claim tax deduction on interest paid on such borrowings, a tax tribunal has ruled. Giving its ruling in a case where two companies had claimed tax deduction on interest paid over the sum borrowed from Reliance Capital, the Mumbai bench of the Income-Tax Appellate Tribunal had held that "no deduction is allowable to the assessee in respect of interest paid on borrowed funds". Nikhil Investments and Kankhal Investments and Trading borrowed funds from Reliance Capital and subsequently bought shares of construction major Larsen & Toubro. While Nikhil Investments borrowed about Rs 25 crore, Kankhal had borrowed about Rs 5.08 crore and later they claimed tax deduction under section 36(1)(iii) of the Income- Tax Act.
4 May, 2008, 1138 hrs IST, PTI
THE ECONOMIC TIMES