TaxTMI 
TaxTMI 
2008 (5) TMI 436
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....e and six questions at the instance of the assessee, under section 256(2) of the Income-tax Act, 1961 (the Act) for the opinion of this court. R. A. No. 700/Ahd/1998 (by the Revenue) "Whether the Appellate Tribunal is right in law and on facts in allowing deduction of interest amounting to Rs. 38,92,769 under sec- tion 36(1)(iii) on the funds borrowed for setting up of a new business which is unconnected with the regular business of the assessee ?" R. A. No. 783/Ahd/1998 (by the assessee) "Whether, in the facts and circumstances of the case the Tribunal was right in law in holding that the assessee was not entitled to deduction of expenditure of Rs. 32,56,038 incurred by it ? Whether, in the facts and cir....
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....imed deduction of a sum of Rs. 38,92,769 which included various expenses comprised of 20 items as recorded by the Tribunal in paragraph 6 of its order. The Assessing Officer disallowed the same and hence the assessee carried the matter in appeal before the Commissioner (Appeals). However, the Commissioner (Appeals) confirmed the disallowance made by the Assessing Officer and hence the assessee preferred a second appeal before the Tribunal. The Tribunal has allowed deduction of a sum of Rs.6,36,731 towards the interest paid for the funds borrowed for setting up of a new business which is unconnected with the regular business of the assessee. The rest of the expenses amounting to Rs. 32,56,038 have been held to be rightly disallowable by the ....
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....rpose of business', occurring in section 36(1)(iii), indicates that once the test of `for the purpose of business' is satisfied in respect of the capital borrowed, the assessee would be entitled to deduction under section 36(1)(iii) of the 1961 Act. This provision makes no distinction between money borrowed to acquire a capital asset or a revenue asset. All that the section requires is that the assessee must borrow capital and the purpose of the borrowing must be for business which is carried on by the assessee in the year of account. What clause (iii) emphasises is the user of the capital and not the user of the asset which comes into existence as a result of the borrowed capital unlike section 37 which expressly excludes an expense of a c....
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....on under section 37 of the Act. The contention on behalf of the applicant-assessee is that the assessee is engaged in the business of manufacturing and selling of ice cream and the unit is operating at Tarapur ; about 200 to 250 kms away from the existing unit an additional unit for procurement of milk and production of milk products was set up at the village Sinnar, District Nasik in the State of Maharashtra; that the said unit should be considered as an extension of the same busi- ness because procurement of milk was a case of backward integration, milk being necessary for making ice-cream. It was contended that in the case of Deputy CIT v. Gujarat Alkalies and Chemicals Ltd. [2008] 299 ITR 85 (SC), the apex court has specifically held th....
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....that the Commissioner of Income-tax (Appeals) was perfectly justified in holding that the expenditure other than interest which was admit- tedly related to the setting up of a separate unit at Sinnar for the pro- duction/procurement of milk and milk products was in the capital field and was rightly capitalised by the assessee in the books of account and was not admissible as deduction under the provisions of section 37 which specifically prohibits the claim of deduction of expenditure of personal nature or of capital nature. In this connection, we are in complete agreement with the reasoning and conclusion of the Commissioner of Income-tax (Appeals) as recorded in paragraphs 76 to 78 of the impugned order and hold that except for the amount....
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....apital expenditure which is not entitled to deduction under section 37 of the Act considering the plain language of the said provision. 13. In so far as questions Nos. 4,5 and 6 at the instance of the assessee are concerned, they relate to allowability of foreign travel expenses to the tune of Rs. 11,05,724. The finding of the Tribunal in this connection reads as under: "Coming to ground No. 4 relating to foreign travelling expenses of Rs. 11,05,724 the claim of the assessee before us is that it not only related to new unit for the production/procurement of milk and milk products at Sinnar but also to the existing ice cream manufacturing unit. However this contention of the assessee's counsel does not appear to be correc....