TaxTMI 
TaxTMI 
2015 (2) TMI 531
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....temporary advancement of funds as income from Other Sources instead of considering the same as Profits & Gains of Business or Profession. 2. The Hon'ble CIT(A) erred in capitalizing the interest paid during the year to the cost of land instead of considering interest paid as normal business expenditure u/s 36 of the Income Tax Act, 1961. 3. Without prejudice to the other grounds of appeal, Your Appellant prays as under; The Hon'ble CIT(A) erred in disallowing the deduction of interest paid on borrowed funds to the extent they were advanced as loans, the interest on which has been assesse....
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....ersy over the title of the said property there was delay in finalising the deal. In the meantime the assessee-company thought it prudent to advance the idle sum, lying in the bank account, on interest. The rate of interest on the amount borrowed as well as the interest charged by the assessee was the same, i.e. 12%. It was contended that the assessee having commenced business in the form of processing the proposal for purchase of the property it has to be assumed that the assessee commenced business in which event the interest paid by the assessee should be treated as revenue in nature and ought to have been allowed as business expenditure. In so far as the interest received by the assessee, it was pleaded that in the business sometimes fun....
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....unt of interest paid in respect of capital borrowed for acquisition of an asset or for extension of existing business, till the date on which such asset was first put to use, shall not be allowed as deduction. It may be noted that proviso to sub-clause (iii) to section 36(1) reads as under: - "Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not); 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, sh....
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....nd hence it has to be assumed that the assessee commenced its activity. When asked as to how the assessee advanced the idle funds prior to commencement of business, it was submitted that discussions were held during the relevant period of time and in the case of real estate business when the process of finalisation of deal commenced it has to be assumed that the business activity had commenced. It was claimed that somewhere in the month of November the assessee started the process of making enquiries with regard to a particular property and in order to purchase the land it had taken loan from the bank but due to some unexpected delay in finalisation of the deal the funds were lying idle but the fact remains that the activity of the assessee....