TaxTMI 
TaxTMI 
2012 (9) TMI 478
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....e assessment year 1999-2000. 2) Being aggrieved, the revenue has formulated the following questions of law for consideration of this Court. a) Whether on the facts and circumstances of the case and in law, the Tribunal is justified in allowing Rs.2,98,235/- out of interest paid on borrowed loans on a pro-rata basis in respect of capital expenditure in respect of existing business? b) Whether on the facts and circumstances of the case and in law, the Tribunal is justified in allowing Rs.1,39,20,104/- in respect of repairs and maintenance charges treating it as revenue in nature? c) Whether on the facts and circumstances of the case and in law, the Tribunal is right in deleting charging interest u/s. 234D in respect of proportionat....
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....isallowance of interest is relatable to work in progress and the respondent had itself capitalized all expenses related to the new project (under construction). 5) On second appeal, the Tribunal held that the deductibility of interest in respect of funds borrowed for capital expenditure for the period prior to assessment year 2005-06 is covered by the decision of the Apex Court in the matter of Dy. Commissioner of Income Tax Vs. Core Health Care Ltd. reported in 298 ITR 194 and the interest paid is deductable under Section 36(1) (iii) of the Act. 6) Section 36(1)(iii) of the Act during the relevant assessment year reads as under : "36(1)The deduction provided for in the following clauses shall be allowed in respect of the matters dealt w....
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....are concerned for the assessment year 1999-2000. The interest paid on borrowed funds has to be allowed in terms of Section 36(1)(iii) of the Act which provides that deduction should be allowed in respect of payment of interest on amounts borrowed even in respect of capital used for the purposes of business or profession. Mr. Pardiwalla points out that the construction work in respect of which borrowed funds were utilized was only to set up a new project of their business centres. These funds have not been utilized to establish a new business but have been utilized to establish new business centre which is a part of its running business. Consequently the expenditure incurred on payment of interest for borrowed funds which have been used for ....
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....ates is that the amount must be borrowed for the purposes of business. The Court held that there is a difference between borrowing of a loan and actual utilization/acquisition of the loan for the purpose of a capital asset. Borrowing of a loan does not bring into existence an asset of enduring nature. The investment on the borrowed capital brings into existence an asset of an enduring nature. The Court observed that a transaction of borrowing is not the same as a transaction of investment. Consequently, the interest paid has to be allowed as deduction under section 36(1)(iii) of the Act as in existence during the assessment year 1999-2000. In view of the above, question (a) raises no substantial question of law and is therefore, dismissed. ....
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....nt spent on renovation during the year was to the extent of Rs.1.54 crores and this quantum by itself is evidence of the fact that this expenditure cannot be said to be for current repairs. Consequently, he submits that the Tribunal erred in having allowed the expenses for repairs and maintenance as an expenditure for current repairs. On the other hand, Mr. Pardiwalla submits that the expenses incurred by the respondent were essentially in the nature of renovation of various buildings where they are running their business centres. According to Mr. Pardiwalla none of these expenses resulted in acquisition of any new asset and the repairs and maintenance of existing building was an on going process carried out by it so as to augment the reven....