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2016 (7) TMI 1285 - ITAT AHMEDABADDisallowance of expenses incurred on solar power project - Held that:- We have perused the Memorandum of Association available at page no.121 onwards of the paper books. As far as the contention of the ld.counsel for the assessee that construction of power plant or its maintenance is being provided in the main object is concerned, according to our mind, it is not related to power plant and related to civil construction work. This aspect was also otherwise not considered by the AO in the assessment order nor it is discernible. Considering the smallness of the issue, we deem it not necessary to set aside the issue, and we concur with the finding of this ld.CIT(A). This ground of appeal is rejected. Disallowance of incurred for a new project namely, Ahmedabad Township Office Project - Held that:- It is in the line of the assessee’s existing business, which cannot be treated as a separate individual and new business for which expenditure has been incurred, which deserves to be capitalized. The ld.CIT(A) has not appreciated the facts in right perspective. Section 37 of the income Tax Act contemplates that if an assessee incurs any expenditure, which is not of the nature described in section 30 to 36, not being in the nature of capital expenditure or personal expenditure, and it was laid out wholly and exclusively for the purpose of business then, it is to be allowed. The expression “wholly” refers to the quantum and “exclusively” refers to object/motive. Now in the present case, assessee is in the real estate development business. It has incurred this expenditure to fulfill its requirement in this line. Therefore, the expenses could not be disallowed. We allow this ground and delete the disallowance. Enhancement to the income of the assessee - Held that:- The ld.CIT(A) failed to take cognizance of the amendment made to the partnership deed. Non-consideration of this amendment had led the ld.CIT(A) to observe that the assessee had made capital contribution to other firm also, where the assessee is a partner. It is pertinent to mention here that the case of the assessee is that it has taken from loan from two concerns, whenever it has an idle fund, these were being used by other concerns also. But specifically, ultimately the loans travelled to M/s.Pratham Dosti Realty and that firm has recognized its obligation to pay interest as per the amendment made to the partnership deed. The assessee has demonstrated as to how interest bearing funds were provided to a firm where it is a partner. It has also demonstrated that interest was given to the assessee by the firm as provided in the partnership deed. The ld.First Appellate Authority has created an artificial distinction about the user of interest bearing funds. It was construed by the ld.CIT(A) that the interest bearing funds were used by the assessee as a capital contribution in other three firms from where share of profit would be tax free. The ld.CIT(A) failed to consider that if payment of interest on capital of partners is being provided in the partnership deed that interest income would not be exempt from tax, and section 14 will not be applicable. In the present case, assessee has demonstrated that interest expenditure was incurred on earning interest income from the partnership firm.
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