TaxTMI 
TaxTMI 
2013 (5) TMI 19
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....- is interest relating to the capital asset of the appellant. Such findings are opposed to evidences on record. 3. The lower authorities have erred in holding that the processing charges of Rs.48,250/- have resulted in long term benefit to the appellant and are related to the creation of capital Asset. Such findings are opposed to evidences on record. 4. The above grounds of appeal are independent and without prejudice to one another. 2. The brief facts of the case are that the assessee filed its return of income on 31.,10.2005 declaring total income at Rs.2,60,15,490/-. The case was selected for scrutiny. During assessment proceedings, the Assessing Officer observed that the assessee had classified some capital work in progress in the b....
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....f Rs.2,21,034/- as interest paid on building term loan. The assessee was asked to furnish details of term loan along with treatment of interest, The assessee submitted that capital work in progress for the factory had commenced in financial year 2003-04 and upto March, 2004 total amount spent in capital work in progress amounted to Rs.68.89 lakhs. It was further submitted that during the year under consideration, the assessee further spent an amount of Rs.277.09 lakhs. It was further submitted that term loan for building was sanctioned in the month of March, 2005 and bank had provided as on 31.3.2005 an amount of Rs.2,21,034/- as interest and had recovered the same through CC Account in subsequent year. It was further submitted that since a....
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....balance of Rs.5,20,818/- relating to earlier year which was not claimed as revenue expenditure in the earlier year. He further took us to pages 28 to 38 where quotations of construction of building and copy of account of contractor was placed. In view of the above facts, he argued that assessee was already into the business and the expenditure of interest was incurred to further carry on its business in the new premises and therefore was allowable u/s 36(1)(iii) of the Income Tax Act, 1961 . Reliance in this respect was placed on the following judgments:- 1. Capital Bus Service v. CIT, New Delhi 123 ITR 404 (Delhi High Court). 2. India Cement Ltd. v. CIT, Madras 60 ITR 52. 3. Bombay Steam Navigation Co. Pvt. Ltd. v. CIT 28 ITR 919 (SC). ....
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....t relevant and the only thing mattered was its utilization. 9. The Ld DR, on the other hand, took us to page 29 of paper book where scope of work to be done was placed and in view of this he argued that factory building was to be constructed which was the asset in consideration on which interest on loan was paid and which had not been put to use. He took us to provisions of section 36(1)(iii) along with its proviso and argued that it was a simple case where monies or expenses including interest on loan can be claimed as revenue expenditure only after these are put to use. In respect of ground No.2, the Ld AR submitted that though term loan was not used but the amount was credited to other accounts of the assessee and which the assessee had....
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....n (whether capitalized in the books of accounts or not) is for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction." So the plain reading of section clearly establishes that interest on loan taken for acquisition of such assets which are acquired by the assessee for extension of its existing business are not allowable till they are put to use. In the present case, there is no doubt and there is no dispute regarding the fact that assets were not put to use. Therefore, in our opinion the Assessing Officer had rightly made the disallowances and Ld CIT(A) had rightly confirmed the same. The Ld AR has relied up....
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....s due to foreign exchange fluctuation which is altogether different than the facts and circumstances of the present case. 4. Bombay Steam Navigation Co. Pvt. Ltd. v. CIT: The facts of this case are that pursuant to a scheme of amalgamation, the assessee company had acquired the assets of two companies and had paid part consideration by issuing equity share and balance amount was to carry interest until repaid. The Hon'ble Supreme Court had held that such interest was allowable as revenue expenditure holding that transaction of acquisition of asset was closely related to commencement and carrying on of assessee's business and interest paid on un-paid balance was to be regarded as expanded for the purpose of business. However, the facts of t....