Appeal allowed on interest, business setup confirmed for 2012-13 financial year.

The Tribunal partly allowed the appeal, deleting the addition related to the interest on borrowed capital and confirming that the business was set up in the financial year 2012-13. The issue of charging interest under Section 234B was deemed consequential and not further adjudicated. The appeal outcome was pronounced on 24/07/2018.

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Issues Involved:
1. Jurisdiction and validity of additions and disallowances under Section 143(3).
2. Disallowance of interest on borrowed capital under Section 36(1)(iii).
3. Denial of benefit of set-off of unabsorbed business losses.
4. Charging of interest under Section 234B.

Issue-wise Detailed Analysis:

1. Jurisdiction and Validity of Additions and Disallowances under Section 143(3):
The assessee contested that the additions and disallowances made in the order under Section 143(3) were bad in law and on facts for want of jurisdiction and other reasons. However, this ground was general in nature and did not require adjudication, thus dismissed.

2. Disallowance of Interest on Borrowed Capital under Section 36(1)(iii):
The core issue was whether the interest paid on borrowed capital used for purchasing land could be allowed as a business expenditure. The assessee argued that the business was set up during the financial year 2012-13, and the interest on borrowed capital was a legitimate business expense under Section 36(1)(iii). The assessee provided evidence of various steps taken to set up the real estate business, including purchasing land, applying for land conversion, and obtaining site plan approval. The authorities initially disallowed the interest, claiming it was incurred before the commencement of business and should be capitalized. However, the Tribunal found that the business was indeed set up in the financial year 2012-13, and the interest paid on borrowed capital was allowable as a business expenditure. The Tribunal directed the deletion of the addition confirmed by the CIT(A), supporting its decision with various case laws that distinguish between the setting up and commencement of business.

3. Denial of Benefit of Set-off of Unabsorbed Business Losses:
The assessee did not press this ground during the hearing, and it was dismissed as not pressed.

4. Charging of Interest under Section 234B:
The assessee contested the charging of interest under Section 234B, denying any liability for such interest. The Tribunal noted that since the addition regarding the interest paid on borrowed capital was deleted, the issue of charging interest under Section 234B became consequential and did not require further adjudication.

Conclusion:
The Tribunal partly allowed the appeal, deleting the addition related to the interest on borrowed capital and noting that the business was set up in the financial year 2012-13. The issue of charging interest under Section 234B was deemed consequential and not adjudicated further. The appeal was pronounced in the open court on 24/07/2018.

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