Jagannatha Shetty, J.
1. This is a reference under s. 256(1). The question of law referred by the Income-tax Appellate Tribunal, Bangalore Bench is :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the interest borrowings for the purchase of shares constituted part of the cost of the shares for the purpose of working out the capital gains on the sale of shares ?'
2. During the previous year relevant to the assessment year 1975-76, the assessee, an individual, sold shares of the value of Rs. 74,902 and returned capital gains of Rs. 28,402. The assessee claimed deduction of Rs. 30,478, being interest paid to M/s. MGA Pai & Sons on the money borrowed for the purchase of the shares.
3. The ITO disallowed this claim on the ground that said expenditure had been allowed in computing her income from dividends, hence, such allowance was not permissible as per provisions of s. 55.
4. The assessee's claim was allowed by the AAC and the Tribunal also agreed with that view, on an appeal by Department.
5. The main source of the assessee's income was by way of dividends on her shareholdings. The assessee claimed deduction of Rs. 30,478, being the cost incurred for the acquisition of the shares. The ITO did not allow the claim on the ground that the sum of Rs 29,116 was already allowed as an expense in computing the assessee's income from dividends in the assessment for the year and that a further deduction of interest paid was not called for.
6. The question that is referred for our opinion is, whether the interest on borrowings for the purchase of shares, constituted part of the cost of shares, for the purpose of working out the capital gains on the sale of shares The question apparently deals with mode of finding out the cost of acquisition of a capital asset for purposes of s. 48. Section 48 deals with the mode of computation and deduction permissible while computing the capital gains chargeable to tax. 'Cost of acquisition' includes all expenditure related to the acquisition of the asset. Interest paid on money borrowed for purchasing the shares is also one such expenditure which is included in the cost of asset for computing the capital gains. Under s. 55(2), the expression 'cost of acquisition' is defined for purposes of ss. 48 and 49, with reference to the dates of acquisition in clauses (i) and (ii).
7. These provisions are relevant for finding out the 'actual cost' for purposes of computation of cost of acquisition under s. 48. But the question that really arises for our opinion, on the facts stated, relates to the mode of computing the taxable income of the assessee. The interest paid by the assessee for the acquisition of the shares on the money borrowed for that purpose, undoubtedly is an expenditure incurred for the acquisition of the shares and, hence, constitutes 'cost of acquisition' for purposes of s. 48. But the ITO has disallowed this expenditure claimed, for the reason that a sum of Rs. 29,116 paid towards interest and collection charges had already been allowed as am expenditure while computing the Rs. 30,478 again is not permissible. The ITO relied upon the provisions of s. 55 to disallow the interest.
8. On behalf of the Revenue one of the contentions urged before the Tribunal was that the deduction claimed by the assessee was already allowed as revenue expenditure under s. 57 of the Act and the same amount cannot be allowed again under s. 48. It was contended that if such deduction was allowed, it would amount double deduction which is contrary to the scheme of the I.T Act. The Tribunal unfortunately brushed aside that contention. It followed the decision in CIT v. Mithlesh Kumari : 92ITR9(Delhi) and held that the interest paid by the assessee on money borrowed for the purchase of shares constitutes part of the actual cost of acquisition which is liable to be deducted under s. 48.
9. But Mr. Bhat, learned counsel for the assessee, submitted that the sum of Rs. 30,478 disallowed is quite different, from the sum of Rs. 29,116 allowed as interst. If these two sums are different, the ITO may not be justified in disallowing the sum of Rs.30,478, being the interest paid to M.G.A. Pai and Sons on the borrowings for the purchase of shares. But, if the said amount represents the same interest payable on the said borrowings, it seems to us that the assessee cannot get the benefit over again under s. 48.
10. Mr. Bhat, however, submitted that s. 48 should be examined independently without reference to s. 57. Section 48 provides for deducting from the full value of consideration received the cost of acquisition of the capital asset and the cost of improvements, if any. The interest paid on borrowings for the acquisition of a capital asset must fall for deduction under s. 48. But, if the same sum is already the subject-matter of deduction under other heads like those under s. 57, we cannot understand how it could find place again for the purpose of computation under s. 48. No assessee under the scheme of the I.T. Act could be allowed deduction of the same amount is already allowed under twice over. We are firmly of the opinion that if an amount is already allowed under s. 57 while computing the income of the assessee, the same cannot be allowed as deduction for the purpose of computing the 'capital gains' under s. 48.
11. The statement of law thus being made clear, it is not possible to answer the question one way or the other, since there is no finding recorded by the Tribunal in regard to the contention raised by the Department that it would amount to double deduction. We, therefore, decline to answer the question for want of a required finding and remit the matter to the Tribunal for fresh disposal in the light of the observations made.