1983 (8) TMI 26

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....delivered by JAGANNATHA SHETTY J.-The following question at the instance of the Revenue has been referred by the Income-tax Appellate Tribunal under s. 256(1) of the I.T. Act, 1961 : " Whether, on the facts and in the circumstances of the case, the amount of interest of Rs. 96,170 on money borrowed for the purpose of purchase of new machinery and land is allowable is a revenue expenditure ?"....

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....ion of Rs. 96,710 by way of interest paid on the capital borrowed for the purpose of purchasing the machinery and the land. The ITO disallowed the claim on the ground that the machinery purchased by the assessee was not used for production in the year of accounting. In reaching that conclusion, he relied upon the decision of the Supreme Court in Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167. ....

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....he decision of the Bombay High Court in Calico Dyeing and Printing Works' case [1958] 34 ITR 265. But the Tribunal did not agree with that contention. It observed that it was not the case of the Revenue that the assessee has started a new venture it was admittedly a running concern and since the borrowed capital was used for the purpose of purchasing machinery and land, the assessee would be entit....

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....hat Mr. Srinivasan is justified in depending upon the decision of the Supreme Court for denying relief to the assessee in the instant case. The Supreme Court was considering the case of an assessee whose business had not commenced and the question raised therein was as to the nature of the interest paid on the borrowed capital for purchasing fixed assets and whether it should form part of the cost....