Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (10) TMI 203 - ITAT CHENNAIDisallow interest paid on capital borrowed for acquisition of new asset in light of provisions of section 36(1)(iii) and proviso provided therein - HELD THAT:- We find that as per proviso, interest paid on capital borrowed for acquisition of asset for expansion of existing business or profession cannot be allowed till date on which such asset was put to use in the business of the assessee. In the present case, new asset acquired by the assessee was ready for put to use in the business, even though, there is no revenue generated from the said new asset. It is well settle principles of law by the decisions of various courts that ‘set up of business’ and ‘commencement of business’ are two separate events. If a business has been set up, even it has not commenced its activities, then expenditure relatable to said business, including interest expenses, if any, should be allowed as deduction. In the present case, AO never disputed the fact that new asset was ready for use in the business of the assessee and also put to use in the business of the assessee. AO disallowed the interest only on the ground that booking has been started in new mandapam from financial year 2016-17 onwards. Date of inauguration and date of booking of hall is not relevant to decide whether business has been set up or not. The moment, the assessee has kept its asset for ready to use in the business, it can be said that business has been set up. There is no doubt with regard to fact that business of the assessee has been set up and accordingly, the assessee has rightly claimed interest paid on capital for acquisition of asset. CIT(A) without considering relevant facts has simply sustained additions made by the AO - Thus, we set aside the impugned order and direct the Assessing Officer to delete additions made towards disallowance of interest paid u/s. 36(1)(iii) - Appeal filed by the assessee is allowed.
|