TaxTMI 
TaxTMI 
2024 (2) TMI 1532
X X X X Extracts X X X X
X X X X Extracts X X X X
.... following questions of law for our consideration: A. Whether on the facts and circumstances of the case, the ITAT is legally justified in deleting the disallowance of Rs. 12,02,07,944/- made by the Assessing Officer on account of interest expenses even when the assessee had not started its business activities? B. Whether on the facts and circumstances of the case, the ITAT is legally justified in deleting the disallowance of interest expenses by ignoring the fact that the expenses incurred prior to the start of the business will have to be capitalized? C. Whether on the facts and circumstances, the ITAT erred in not considering the decision of the Supreme Court in the case of Tuticorin Alkai Chemicals & Fertilize....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny had taken term loans from various banks and financial institutions. That part of the borrowed funds which was not immediately required by the company was kept invested in short-term deposits with banks. Such investments were specifically permitted by the memorandum and articles of association of the company. The company had also deposited certain sums with the Tamil Nadu Electricity Board. It had also given interest-bearing loans to its employees to purchase vehicles. Up to the assessment year 1980-81, interest earned by the company from the various loans given by the company and also from the bank deposits was shown as income and was taxed accordingly. For the accounting year ending on June 30, 1981 (assessment year 1982-83), the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the factories. However, part of the borrowed funds which was not immediately required for the purpose for which it was borrowed, the same was invested in short term deposit by the bank. Initially, the assessee offered the interest received as its income from other sources which was set off against the business loss. Subsequently, the assessee filed revised return and claimed that interest income should be set off against the pre-production expenses and should not be taxed as income from other sources. Now, when we compare the facts of the above case with that of the assessee's case, we find that the facts in the case under appeal before us are altogether different. In the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. (supra), ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... term deposits with the bank. However, the facts in the case of the assessee are altogether different. The main object as per memorandum of articles of association is the development of infrastructure and real estate business. However, during the year under consideration, no infrastructure project or real estate development project had commenced and therefore, the question of borrowing of any money for the purpose of such project does not arise. Therefore, in our opinion, the facts of the assessee's case are altogether different than in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. (supra). Further, in that case, the assessee initially offered the interest income as income from other sources but, subsequently by filling th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....received the interest on the money advanced by it. Therefore, we have no hesitation to hold that the interest paid by the assessee was incurred wholly and exclusively for the purpose of earning of interest income and therefore, the same was rightly claimed u/s 57(iii) and the learned CIT(A) rightly directed for allowing the same. 16. On these facts, the decision of Hon'ble Jurisdictional High Court in the case of Vodafone South Ltd. Vs. CIT - [2015] 378 ITR 410 (Delhi) would be squarely applicable, wherein Hon'ble Jurisdictional High Court held at page 420 of the report as under:- "The sum of Rs.25 crores drawn by the assessee on December 24, 2001, in terms of HSBC's sanction letter was transferred to SCL on th....