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2014 (1) TMI 555 - HC - Income TaxWhether expenditure made to start a telecom business are business expenditure - Held that:- Assessee borrowed money for setting up the V-SAT application and incurred the entire expenditure - After setting up the new facility or the new project, the assessee continues to manage the said project as a part and parcel of the existing project - In order to increase the said capacity, V-SAT application through satellite was adopted to transfer data at much higher speed - The expenditure was incurred for switching over to the new technology - The said expenditure incurred is revenue expenditure - The expenditure squarely falls u/s 37. Interest paid on loan borrowed for purchase of new machinery - Revenue or capital - Held that:- Following Deputy Commissioner of Income-Tax – vs- Core Health Care Limited [2008 (2) TMI 8 - SUPREME COURT OF INDIA] - As per section 36(1)(iii) - There is no distinction between money borrowed to acquire a capital asset or a revenue asset - All that the section requires is that the assessee must borrow capital and the purpose of the borrowing must be for business which is carried on by the assessee in the year of account - An assessee is entitled to claim interest paid on borrowed capital provided that capital is used for business purpose irrespective of what may be the result of using the capital which the assessee has borrowed - “Actual cost of an asset has no relevancy in relation to section 36(1)(iii) - The proviso inserted in section 36(1)(iii) by the Finance Act, 2003, with effect April 1, 2004, will operate prospectively - The assessee was entitled to deduction under section 36(1)(iii) prior to its amendment by the finance Act, 2003, in relation to money borrowed for purchase of machinery even though the assessee had not used the machinery in the year of borrowing - Decided against Revenue.
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