TaxTMI 
TaxTMI 
2016 (8) TMI 58
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....he assessment order, a lump sum disallowance of Rs. 4,91,93,000/- was made out of expenses for selling publicity and medical literature. The matter was carried before the CIT (Appeals) and who had deleted the addition on account Special advertisement expenditure; travelling and medical expenses of the chairman, interest paid on nonconvertible debenture portion of public issue debenture (capitalized); selling publicity and medical literature. Thereafter, the matter was carried before the ITAT and it had upheld the order of the CIT (A) which has given rise to this appeal. 3. While admitting this appeal, several questions were posed for consideration, however the appeal came to be admitted on the following question of law: "Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT (A) in deleting the disallownace of Rs. 5,44,397/- made by the Assessing Officer in respect of interest paid to nonconvertible debenture portion of public issue ? 4. Learned Counsel for the appellant Department has contended that the ITAT has committed serious error in deleting the disallowance made in respect of interest paid on nonconvertible debenture p....
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....not be allowed as deduction. Explanation : Recurring subscriptions paid periodically by shareholders, or subscribers in Mutual Benefit Societies which fulfill such conditions as may be prescribed, shall be deemed to be capital borrowed within the meaning of this clause;" "Definitions of certain terms relevant to income from profits and gains of business or profession. 43. In sections 28 to 41 and in this section, unless the context otherwise requires (1) "actual cost" means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority: Provided that where the actual cost of an asset, being a motor car which is acquired by the assessee after the 31st day of March, 1967, but before the 1st day of March, 1975, and is used otherwise than in a business of running it on hire for tourists, exceeds twentyfive thousand rupees, the excess of the actual cost over such amount shall be ignored, and the actual cost thereof shall be taken to be twentyfive thousand rupees. Explanation 8: For the removal of doubts, it is hereby declared that where any amount is paid or is ....
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....mmissioner of Incometax v. Associated Fibre and Rubber Industries (P) Ltd. (1999) 236 ITR 471, the Division Bench of this Court held as follows: "Even though the machinery has not been actually used in the business at the time when the assessment was made, the same has to be treated as a business asset as it was purchased only for business purposes. In the circumstances, the interest paid on the amount borrowed for purpose of such machinery is certainly a deductible amount." 10. As stated above, the Department contended before us that the judgments of this Court, prior to insertion of Explanation 8 in Section 43(1) of the 1961 Act, has no application to the present case. According to the Department, Section 36(1)(iii) of the 1961 Act being general in nature has to give way to special provisions contained in Explanation 8 to Section 43(1) of the 1961 Act. According to the Department, in none of the earlier judgments this Court has considered the true scope of Explanation 8 to Section 43(1) vis` vis Section 36(1)(iii) of the 1961 Act. We find no merit in this contention. Section 43 groups together all provisions in the nature of definitions or interpretations relevant to the co....
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....by way of proviso in Section 36(1)(viia) by the same Finance Act which is also made with effect from 1.4.2004. Same is the position with regard to insertion of a subsection after Section 90(2) and before the Explanation. This insertion also operates w.e.f. 1.4.04. In short, the above amendments have been made by Finance Act, 2003 and all the said amendments have been made operational w.e.f. 1.4.04. Therefore, the proviso inserted in Section 36(1)(iii) has to be read as prospectively and w.e.f. 1.4.04. In this case, we are concerned with the law as it existed prior to 1.4.2004. As stated above, we are not concerned with the interpretation or applicability of the said proviso to Section 36(1)(iii) w.e.f. 1.4.04 in the present case. 12. In the case of Challapalli Sugars Ltd. (supra) this Court observed that interest paid on the borrowing utilized to bring into existence a fixed asset which has not gone into production, goes to add to the cost of installation of that asset. It was further observed that if the said borrowing was not "for the purpose of business" inasmuch as no business had come into existence, it must follow that it was made for the purpose of acquiring an asset whic....