2023 (10) TMI 203

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.... "1. The order passed by the Commissioner of Income Tax -Appeals 12 for the Assessment Year 2015-16, is contrary to law, evidence and facts and is arbitrary. 2. The Learned Commissioner of Income Tax, Appeals, had failed to comprehend that the interest paid amounting to Rs. 64,25,874/- on the loan availed from M/s Fullerton, does not qualify for disallowance u/s 36(1)(iii) of the Act, and the provisions have been invoked and applied in an erroneous manner. 3. The Learned Commissioner of Income Tax, Appeals has also grossly erred in not appreciating that the new mandapam, representing a different though identical business/vertical, would not amount to extension of the existing business to invoke sec. 36(1)(iii), and henc....

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....2016 and started booking from financial year 2016-17 and therefore, argument of the assessee that building was ready for use is not correct. Therefore, the Assessing Officer invoked provisions of section 36(1)(iii) of the Act and disallowed interest paid on loan borrowed for construction of new mandapam of Rs. 64,25,874/- and added to total income of the assessee . 4. Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee has filed detailed written submissions on issues which has been extracted at para 6.3 on page 6 to 12 of the learned CIT(A) order. The sum & substance of the arguments of the assessee before the learned CIT(A) are that when business of the assessee ha....

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....f two businesses are with one management, then even if, new business is not commenced, interest paid on borrowed capital for acquisition of new asset should be allowed as deduction. 6. The learned DR Shri P.Sajit Kumar, supporting order of the Ld.CIT(A) submitted that as per proviso to Section 36(1)(iii) of the Act, interest paid in respect of capital borrowed for acquisition of an asset for extension of existing business or profession for any period beginning from the date on which capital was borrowed for acquisition of asset, till the date on which such asset was put to use shall not be allowed as deduction. Since, new asset was not put to use in business of the assessee, interest paid on capital borrowed for acquisition of said asset....

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....as ready for put to use in the business, even though, there is no revenue generated from the said new asset. It is well settle principles of law by the decisions of various courts that 'set up of business' and 'commencement of business' are two separate events. If a business has been set up, even it has not commenced its activities, then expenditure relatable to said business, including interest expenses, if any, should be allowed as deduction. In the present case, the Assessing Officer never disputed the fact that new asset was ready for use in the business of the assessee and also put to use in the business of the assessee. But, the Assessing Officer disallowed the interest only on the ground that booking has been started in new mandapam ....