TaxTMI 
TaxTMI 
2026 (7) TMI 2023
X X X X Extracts X X X X
X X X X Extracts X X X X
....u/s. 250 of the Act, the Assessee Appellant begs to present the instant appeal on the following grounds which are in alternative and without prejudice to each other. 2. The Ld. CIT(A) erred in wrongly disallowing interest expenses of Rs.23,00,731/- u/s. 36 (1)(iii) which the Appellant prays Your Honour to delete the said disallowance and allow the said amount of interest expenses in the books of the Assessee. 3. Appellant craves leave to add, alter, amend, delete and/or modify any or all the aforesaid grounds of appeal either at the time of hearing or at any time before the date of hearing. 2. The only effective ground raised by the assessee relates to challenging the order of the Ld. CIT(A) in upholding the disallowanc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AY 2015-16. ● Copy of notice under Section 142(1) dated 27.09.2017 and its response along with acknowledgement. ● Copy of notice under Section 142(1) dated 23.10.2017 and its response along with acknowledgement. ● Copy of notice under Section 142(1) dated 17.11.2017 and its response along with acknowledgement. ● Copy of submissions before the Ld. CIT(A)/NFAC along with acknowledgement. ● Copy of loan sanction letter from ING Vysya Bank (now known as ICICI Bank). ● Copy of Bank Statement of ING Vysya Bank (now known as ICICI Bank) for FY 2012-13. ● Copy of loan sanction letter from HDFC Bank. ● Copy of repayment schedule of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mitted that the assessee was having sufficient interest-free funds to finance the purchase of the land. Even otherwise, we noticed that the disallowance under Section 36(1)(iii) of the Act was made on the allegation that the borrowed funds were used for the purchase of land, but the said land had not been put to use for business purposes. Consequently, the interest paid on such borrowed funds was held to be not allowable. 8. As per the case set up by the assessee, it is a partnership firm engaged in the business of trading, import and consignment sale of tools, steel pipes, iron and steel straps, etc. According to the assessee, the nature of the goods dealt with requires substantial storage area because it trades in iron and steel rods, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ansport bills also clearly mention transportation from Balanagar to Cherlapally and from Cherlapally to the godown. This establishes that the land was actively used as a storage yard for goods. The existence of such delivery documents clearly demonstrates that goods were delivered to the said land, inventories were stored there, and the land was used as a business storage facility. 11. So far as the legal proposition relating to deduction of interest under Section 36(1)(iii) of the Act is concerned, the basic requirement is that the capital must be borrowed and used for the purposes of business. Therefore, interest can be disallowed only where the borrowed funds are used for non business purposes or where the capital asset has not yet be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e is already carrying on an existing business, any interest paid on borrowings taken for the purpose of that business is allowable as a deduction under Section 36(1)(iii) of the Income-tax Act, 1961. This remains true even if the borrowed funds are utilized for the acquisition of new machinery which has not yet been put to use during the relevant previous year. The allowability of such interest does not depend upon the actual use of the asset or the commencement of production from the new machinery. Further, the concept of "actual cost" as defined under Section 43, including Explanation 8 thereto which requires capitalization of interest for the purpose of computing depreciation-has no application while determining the deduction under Secti....