2015 (2) TMI 809

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.... 1990-91 vis-a-vis the respondent. The respondent is a hotel establishment and is assessed to tax. In the assessment years 1989-90 and 1990-91, it claimed certain benefits under the Income-tax Act, 1961 (for short "the Act"). The first is about treating a sum of Rs. 3,00,000 as revenue expenditure. The second is about the exemption from payment of interest on the loan borrowed by it. The Income-tax Officer ("the ITO") took the view that the amount of Rs. 3,00,000 spent by the respondent was for construction and that it deserves to be treated as capital expenditure. On the second aspect, the Income-tax Officer took the view that the respondent, no doubt, borrowed the amount, but has passed on the same to its sister concern and thereby, it i....

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.... commercial use, partakes of the character of revenue expenditure and deductible from the income ?        (C) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the disallowance on account of interest payments are liable to be granted in spite of the clinching evidence establishing diversion of the borrowed funds for unfruitful and non-commercial purposes ?" The only question framed in I. T. T. A. No. 87 of 2001 and questions A and C framed in I. T. T. A. No. 119 of 2001 pertain to one area of controversy and question B pertains to another. Sri S. R. Ashok, learned senior standing counsel for Income-tax, submits that the Tribunal did not undertake ....

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....its that the expenditure of Rs. 3,00,000 was only for a temporary alteration of the premises and it cannot be treated as capital expenditure. Two questions arise for consideration. The first is as to whether the respondent was entitled to deduct the interest paid on the loans borrowed by it, in its profit and loss account. The second is as to how the sum of Rs. 3,00,000 spent by the respondent for construction of rooms, be treated. Section 36 of the Act provides for deductions of various categories from the income. The interest paid on the loans is one such deduction. To qualify for such deduction, the borrowed amount must be spent for the business or the profession of the assessee. The Explanation appended to section 36(1)(iii) of the Ac....

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..... 811/Hyd/1994. It is in relation to the assessment year 1988-89 and the Tribunal has reversed the order passed by the Commissioner. Had this been taken note of by the Tribunal, when it decided the present appeals before it, things would have been different altogether. We are of the view that the matter needs to be examined by the Tribunal with reference to the relevant record, duly giving opportunity to both the parties. Coming to the second question, the Tribunal has simply concurred with the view expressed by the Commissioner just by taking into account, the claim made by the respondent for the assessment year 1982-83 and the fact that the cost of construction incurred by it be treated as revenue expenditure was accepted. Beyond that, ....