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2014 (9) TMI 727 - ALLAHABAD HIGH COURTSet off of brought forward losses and unabsorbed depreciation against the business income disallowed – Held that:- Production of edible oil unit at Gajraula was temporarily suspended, because of losses and as business expediency, it was leased out - However, lease was terminated before due date and the production was reverted back, but unfortunately, because of loss it was leased out again - The temporary suspension of business does not convert the 'business income' into 'income from other sources' - the AO has already treated lease rent as business income - when it is so then the set off of business loss deserved to be allowed against the income arising under the head "Business" in respect of the two units - The income derived from leasing of commercial business assets, resulted in commercial income taxable under the head "Business" - Change in the mode and manner of deriving income by exploiting commercial assets either by self or by leasing the same would not change the character of income and such income would continue to be the income under the head "Business income" - the carry forward and set off unabsorbed business losses and depreciation are permissible against lease rental income - the order of the Tribunal is upheld – Decided against revenue. Interest on borrowed capital – Held that:- The assessee has borrowed some funds for expansion of the existing business, on which interest was paid - both the appellate authorities have allowed the claim by observing that the interest on borrowed funds for acquiring capital asset is also an allowable deduction u/s 36(i)(iii) - the borrowed funds was utilized for expansion of the business and the interest paid is allowable - the order of the Tribunal is upheld – Decided against revenue. Amount wrongly mentioned – Held that:- The AO has made the addition by observing that the G.P. rate was lower in comparison to the earlier years - in the earlier years, the excise duty was separately credited to excise duty payable account, whereas, during the AY under consideration, the excise duty is included in the sale price - If the element of excise duty is excluded, the G.P. rate during the year comes to 17.4% as compared to 16.69% of the last year - No defects in the books were pointed out by the AO – the order of the Tribunal is upheld – Decided against revenue.
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