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2021 (10) TMI 686 - HC - Income TaxClaim of interest expenditure on loan obtained for the purchase of land in MRC Nagar - Significance of term “put to use” - as per AO assessee, having not commenced the project in MRC Nagar and had not offered any income from the project, all the expenditures, which are specifically attributable to the project, have to be accounted as 'Work-in-Progress' and only when the income is generated and offered from the project, the expenditure can be claimed - HELD THAT:- When the appeal was being heard by the CIT(A), the assessee furnished an Abstract of Expenses pertaining to MRC Nagar project and the expenses were in the nature of advertisement expenses, architect fees, CMDA charges, consultancy charges, electricity charges, legal fees, rent, security charges, site expenses, various labour charges and purchase of materials. Assessee had also furnished the ledger accounts for these expenses and also the facts that they carried on major work of demolition of the existing structure which was newly built by the previous owner for Hotel business and this demolition was done by the assessee. This factual position would go to show that the land was put to use in the Assessment Year under consideration. Tribunal had rightly noted that the term “put to use” in the proviso in Section 36(1)(iii) would be applied to capital asset/income earning apparatus/facilitating the business activity and therefore, the Statute envisages the importance of such capital asset should be put to use in the business in contra distinction to the inventory of the assessee. Tribunal noted that the inventory in the business/holding of inventory in the business by itself is a business activity in the normal course and in continuation of business of construction pursued by the assessee - attempt to apply the proviso to the case of the assessee would lead to wrong interpretation of law and therefore, the reasons given by the Assessing Officer to disallow the interest expenditure by applying the provisions of Section 36(1)(iii) is not in accordance with law - Tribunal noted that the assessee is into the business of Real Estate Development and in the process of executing two projects at different places and the Assessing Officer was not justified in treating the two projects on stand-alone basis and also that the property in MRC Nagar was not put to use. Tribunal noted that the assessee has offered substantial income from the Atlantic project and the attempt to apply Matching Concept principle is misconceived. Tribunal was right in allowing the appeal filed by the assessee and holding that the term “put to use” applies to capital asset only because capital asset is held to facilitate the business activity and sometimes, it needs to be prepared after it is acquired for being used to facilitate the business activity and in the instant case, the assessee was able to establish that substantial activities had been done in the project, which would go to show that the property purchased has been put to use. - Decided against revenue.
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