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2013 (7) TMI 336 - HC - Income TaxInterest u/s 36(1)(iii) - Loans borrowed for expansion of business - New unit established in the existing premises under the same management and finance control - Held that:- main expenditure incurred was in the nature of salary, wages, repairs, maintenance, design and engineering fee, travelling and other expenses of administrative nature. Certain part of the expenditure was also made for the construction of additional shades, building to keep machines and products safely. But, no separate accounts were maintained - The unit, which the appellant has set up had inextricable linkage with the existing business of the appellant. The proposed business was not an individual business but vertical expansion of the present business. Thus, the test of existing business with common administration and common fund is clearly met - It is a case of interest paid on the borrowed capital - Interest paid on the loan borrowed from the IDBI will have to be treated as revenue in nature and accordingly, the same is allowable - Following decision of CIT vs. Tarai Development Corporation Ltd.[1993 (8) TMI 64 - ALLAHABAD High Court], Rama Synthetics India Ltd. vs. CIT [2009 (9) TMI 635 - Delhi High Court] - Decided against Revenue.
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