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2016 (12) TMI 1347 - AT - Income TaxReopening of assessment - as per AO assessee had borrowed funds from HDFC towards financing the construction of building and residential quarters and capitalized the interest portion before the assets are put to use - Held that:- So far as addition on account of payment of commission in respect of transactions entered under “Oil for Food Programme” of the United Nations are concerned, the same is covered in favour of assessee as discussed in the year 2003-04. Following the same reasoning we delete the addition made on account of commission payment. The issue with regard to applicability of proviso inserted in Section 36(1)(iii) by the Finance Act 2003 is concerned, the same is effective from assessment year 2004-05 as per verdict of Hon’ble Supreme Cout in case of Core Health and Care Ltd. [2008 (2) TMI 8 - SUPREME COURT OF INDIA] So far as disallowing the claim of interest on funds borrowed for financing construction of building and residential quarters is concerned, we find that the proviso inserted in Section 36(1)(iii) by the Finance Act 2003 was effective from assessment year 2004-05. However, the assessment year under consideration is 2002-03, therefore, no disallowance can be made for such interest payment. As an abundant caution, we direct the AO to verify if the interest payment has been added in the cost of construction, no depreciation is to be allowed thereon. We direct accordingly. In the result appeal of the assessee for the assessment year 2003-04 is allowed whereas appeal of the assessee for the assessment year 2002-03 is allowed in part, in terms indicated hereinabove.
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