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2015 (8) TMI 718 - HC - Income TaxInterest expenditure incurred in relation to construction of various hotel projects - revenue v/s capital expenditure - Held that:- In Deputy Commissioner of Income-Tax v. Core Health Care Ltd. 2008 (2) TMI 8 - SUPREME COURT OF INDIA] the Supreme Court came to the conclusion that Explanation 8 of Section 43(1) only applied to provisions like "Sections 32, 32A, 33 and 41 which deal with concepts like depreciation." It was observed that Explanation 8 of Section 43 (1) had no relevance to Section 36 (1) (iii). On the facts of that case since the AYs in question were prior to 1st April 2004, the Supreme Court concluded that the proviso to Section 36 (1) (iii) of the Act would not apply. The rationale for allowing the payment of interest on borrowings as revenue expenditure was explained as it does not matter whether the capital is borrowed in order to acquire a revenue asset or a capital asset, because all that the section requires is that the assessee must borrow the capital for the purpose of his business. This dichotomy between the borrowing of a loan and actual application thereof in the purchase of a capital asset, seems to proceed on the basis that a mere transaction of borrowing does not, by itself bring any new asset of enduring nature into existence, and that it is the transaction of investment of the borrowed capital in the purchase of a new asset which brings that asset into existence. The transaction of borrowing is not the same as the transaction of investment. If this dichotomy is kept in mind it becomes clear that the transaction of borrowing attracts the provisions of Section 36 (1) (iii). Thus as far as the present case is concerned, the Respondent Assessee was entitled to claim the payment of interest on the borrowings made in relation to the hotel projects at Srinagar, Goa and Mumbai, which were in the nature of expansion of the business Assessee, as revenue expenditure. - Decided in favour of the Assessee
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