TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Interest expenditure disallowed, business loss set-off denied, car depreciation partially allowed</h1> <h3>Annapurna Polymers Pvt. Ltd. Versus ACIT, Circle-1, Ahmedabad</h3> Annapurna Polymers Pvt. Ltd. Versus ACIT, Circle-1, Ahmedabad - TMI Issues Involved:1. Disallowance of interest expenditure under Section 36(1)(iii)2. Set off of brought forward business loss3. Disallowance of depreciation on a carIssue-wise Detailed Analysis:1. Disallowance of Interest Expenditure under Section 36(1)(iii):The primary issue pertains to the disallowance of interest expenditure of Rs. 10,92,000 for the assessment years 2005-06, 2006-07, and 2009-10. The assessee argued that the interest expenditure should be allowed as it was incurred wholly and exclusively for business purposes. The Assessing Officer (AO) disallowed the interest expenditure, citing that the funds were borrowed for acquiring a unit of Mafatlal Industries Ltd. and thus fell under the proviso to Section 36(1)(iii). The AO noted that no conveyance deed was executed, no manufacturing activity was undertaken by the assessee, and the acquired asset was not shown in the balance sheet. The AO concluded that the interest paid was for capital borrowed for asset acquisition, hence not allowable.The CIT(A) upheld the AO's decision, stating that the interest was to be capitalized until the asset was acquired and put to use. The CIT(A) emphasized that the unit was not transferred to the appellant company, and thus, the interest on borrowed funds used for acquisition fell within the proviso to Section 36(1)(iii).The Tribunal, after considering the arguments and relevant case laws, supported the Revenue's view. It was noted that the proviso to Section 36(1)(iii) inserted by the Finance Act 2003, effective from 1.4.2004, disallowed interest on money borrowed for acquiring a capital asset until the asset is put to use. The Tribunal concluded that the disallowance was rightly made by the Revenue Department.2. Set off of Brought Forward Business Loss:For the assessment year 2006-07, the assessee contested the non-allowance of set-off of brought forward business loss of Rs. 10,21,207. The CIT(A) observed that after setting off the loss against the income for A.Y. 2005-06, no brought forward loss was available. The Tribunal found no error in the CIT(A)'s observation and dismissed this ground, affirming that the set-off of loss was consequential to the outcome of the appeal for A.Y. 2005-06.3. Disallowance of Depreciation on a Car:For the assessment year 2009-10, the assessee challenged the disallowance of depreciation of Rs. 3,82,492 on a car owned and used for business purposes. The AO disallowed the depreciation, stating that the car was purchased in the name of the Director and not the company. The CIT(A) upheld this decision.However, the Tribunal referred to a precedent (ITO Vs. Typhoon Financial Services) where it was held that a car purchased out of the company's funds and used for business purposes should be allowed for depreciation, even if registered in the Director's name. Respectfully following this decision, the Tribunal directed to allow the depreciation, thus partly allowing the appeal for A.Y. 2009-10.Conclusion:- Appeals for A.Y. 2005-06 and A.Y. 2006-07 were dismissed.- Appeal for A.Y. 2009-10 was partly allowed, granting depreciation on the car.
TaxTMI 
TaxTMI 
