NO TAX RELIEF ON LOAN FOR BUYING SHARES: ITAT

Investors who buy shares with borrowed money from institutions cannot claim tax deduction on interest paid on such debt, 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 has held that “no deduction is allowable to
the assessee in respect of interest paid on borrowed funds”. Under the Income-tax Act, a firm or an individual can claim a tax deduction on the interest paid in respect of capital borrowed for the purpose of a business or profession while the investment in shares could not be considered a business or profession.