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2015 (7) TMI 242 - ITAT DELHIDisallowance u/s 36(i)(iii) on account of interest payment - Held that:- Once admittedly borrowings have been used for the purpose of business and interest has been paid on such borrowing then such interest is eligible for deduction u/s 36(1)(iii) of the Act. The contention of the ld. DR that asset were not put to use i.e. namely the property at 141, First Floor, DLF South Court Yard, Saket was not put to use is an irrelevant consideration. The issue is confined to use of the borrowed funds which have been held to have been used for business then such interest undeniably has to be allowed as deduction. We therefore decline to interfere in the conclusion of the CIT(A) that the disallowance of interest of ₹ 12,95,595/- on the loan availed on mortgage of this property cannot be upheld as the appellant has not utilized the interest bearing funds for purchase of property. As regards interest of ₹ 14,90,373/- it is undisputed that out of the borrowed of ₹ 1,25,00,000/- sum of ₹ 68,00,000/- was utilized for purchase of shop No. GS 0122, First Floor, DLF Grand Mall, Gurgaon. It is also not denied that the property has not been actually used for the purpose of the assessee. All what has been contended is that it is kept as an alternative premise in view of the ceiling drive of residential premises by MCD at Delhi. No evidence has been led to support the aforesaid claim of the appellant. Mere assertion unsupported by any evidence cannot be accepted. On the contrary it has been found as a matter of fact that the said premises is used by M/s Origin Overseas, a sister concern and an internet search showed that the property is presently listed as the branch office of ‘Queens Furniture’ and ‘Affaire’ with the contact number of M/s Shikha Birla, spouse of the appellant. In such circumstances we are unable to accept the claim of assessee that property was an alternative premise. However, since the amount utilized for the purchase of property was ₹ 68,00,000/- therefore the CIT(A) was justified to direct the AO to re-compute the disallowance of interest expenses to the extent relatable to the utilization of interest bearing funds for the purchases of property i.e. ₹ 68,00,000/- out of total loan of ₹ 1,25,00,000/- . - Decided partly in favour of assessee for statistical purposes. Disallowance of interest on service tax penalty - CIT(A) deleted the addition - Held that:- We are of the considered opinion that it is well settled law that the interest is compensatory and not penalty. See Mahalakshmi Sugar Mills Co. v CIT [1980 (4) TMI 1 - SUPREME Court ] - Decided in favour of assessee.
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