TMI Blog2011 (4) TMI 386X X X X Extracts X X X X X X X X Extracts X X X X ..... al for the Appellant. ORDER Ajay Kumar Mittal, J. ‑ This appeal under section 260A of the Income-Tax Act, 1961 (for short "the Act") has been filed by the assessee against the order dated 24-5-2010, passed by the Income Tax Appellate Tribunal Chandigarh Bench 'A', Chandigarh (in short "the Tribunal") in ITA No. 146/Chandi/09, relating to the assessment year 2006-07. 2. The following substantial questions of law have been claimed for determination of this Court : (a) Whether on the facts and circumstances of the case, the Tribunal acted illegally and perversely, in holding that the interest of Rs. 9,05,976 paid by the appellant on Term Loan raised for acquiring asset in its existing business is disallowable in vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the lower authorities, i.e. the Assessing Officer and the CIT(A), and dismissed the assessee's appeal vide the order under appeal. 6. This is how the assessee is once again in appeal before us. 7. We have heard learned counsel for the assessee and have perused the record. 8. The only point that arises for consideration in this case is, whether the interest paid by the assessee on the borrowings made for purchase of the machinery in the facts of the present case was hit by the proviso to section 36(1)(iii) of the Act and was inadmissible revenue expense. 9. Learned counsel for the assessee submitted that there was no extension of business and, therefore, the proviso to section 36(1)(iii) did not apply. According to the learned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction. Explanation - Recurring subscriptions paid periodically by shareholders, or subscribers in Mutual Benefit Societies which fulfil such conditions as may be prescribed, shall be deemed to be capital borrowed within the meaning of this clause;" 11. The effect of proviso to section 36(1)(iii) inserted by the Finance Act, 2003 w.e.f. 1-4-2004 relating to assessment year 2004-05 and subsequent years is to disallow interest on moneys borrowed for acquiring a capital asset till the date on which the asset was brought to use even if it is for extensi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by putting up new machinery. This exercise of increasing the capacity amounts to the process of enlarging and/or extending the existing capacity and hence is a case of extension of existing business. It can by no stretch be called as acquisition of assets for the existing business as even in the director's report, the managing director talks about the changing global textile scenario, and the role of capacities and up-gradation of technology in the success of business which was the instrument for increasing the spindle capacity which, in turn, was to be financed by the term loan raised by the assessee-company during the year. In the facts before the Hon'ble Delhi High Court in Modi Industries Ltd.'s case (supra) relied upon by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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