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2019 (11) TMI 1005 - AT - Income TaxDeduction of interest expenditure U/s 57(3) disallowed - set off with interest income - as held that the said loan was taken by the assessee for construction of hospital and therefore, the expenditure incurred by the assessee is not wholly and exclusively for earning the interest income accordingly, the A.O. capitalized the interest expenditure to the hospital building account and assessed the entire interest income to tax - The assessee challenged the action of the A.O. before the ld. CIT(A) but could not succeed - HELD THAT:- We find that when there is no dispute that the loan was taken for construction of the hospital i.e. for bringing an asset into existence then the interest on such loan till the asset is put to use has to be capitalized as per the decision of Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT [1997 (7) TMI 4 - SUPREME COURT] . On similar footings, when the said amount was to remain ideal with the assessee due to the reason that there was a delay in sanction of the building plan and borrowed fund could not be used for construction of the hospital then the interest received by the assessee has a direct nexus with the construction of the hospital and consequently it would be capitalized and to be used to reduce the cost of construction of the hospital. Accordingly, when the net of the interest received and interest payment would be finally capitalized then the income offered by the assessee to tax as net interest income cannot be disturbed. In view of the above facts and circumstances, the disallowance and addition made by the A.O. is deleted and the net income offered by the assessee to tax is allowed. - Decided in favour of assessee.
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