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2013 (10) TMI 880 - HC - Income TaxAllowance of Interest expenditure u/s 36(1)(iii) of the Income Tax Act – date of commencement of real estate business - Held that:- Respondent company was incorporated on 4th August, 2005, i.e., in the last Assessment Year 2006-07. It had entered into a Memorandum of Understanding dated 31st May, 2006 with third parties in respect of a project near Chandigarh, Mohali, Punjab. Subsequently, joint venture agreement dated 5th July, 2006 was executed between the respondent and third parties - Loan of ₹ 25 crores was taken by the respondent-assessee on 16th May, 2006 - Date of setting up of business depends upon facts and the nature of the business - In case of real estate business, the said setting up of business was complete when first steps were taken by the respondent-assessee to look around and negotiate with parties. There can be a gap between setting up and when first steps were taken by the respondent and finalisation of the first written agreement. Business activities of the respondent did not require construction of a factory, machinery etc. Negotiations are required to enter into a written understanding and it is obvious that the loan was taken for business and to proceed further and conclude the deal – Deduction of interest allowed u/s 36(1)(iii) – Decided against the Revenue.
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