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2022 (11) TMI 766 - AT - Income TaxNature of expenditure - interest expenses - revenue or capital expenditure - Loan / Borrowings for Construction Project - The project constitutes stock in trade of the assessee - To be capitalized as work in progress or not - HELD THAT:- As issue in dispute before us is as to whether the interest expenditure is required to be added to the cost of work in progress in case of income being recognized under Percentage of Completion Method is same as in Lokhandwala Construction [2003 (1) TMI 93 - BOMBAY HIGH COURT] the loan obtained by that assessee before it was for stock in trade. The project of that assessee constituted stock in trade of that assessee. Since that assessee had received loan for obtaining stock in trade, it was entitled to deduction u/s 36(1)(iii) of the Act. The Hon’ble High Court also placed reliance on the decision of the Hon’ble Bombay High Court in the case of Calico Dyeing & Printing Works vs CIT [1958 (3) TMI 59 - BOMBAY HIGH COURT] for the proposition that utilization of the capital was irrelevant for the purpose of adjudicating the claim of deduction u/s 36(1)(iii) of the Act. Ultimately the Hon’ble High Court concluded that interest expenditure could not be treated as capital expenditure nor could it be added to the work in progress. All the appeals of the revenue are dismissed.
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