TMI Blog2008 (5) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs. 38,92,769 under section 36(1)(iii) - - - - - Dated:- 13-5-2008 - MEHTA D. A., SAIYED Z. K. JJ JUDGMENT D. A. Mehta J.- This reference is, in fact, involving cross-references, both by the Revenue and the assessee. The Income-tax Appellate Tribunal, Ahmedabad Bench-C, has referred the following one question at the instance of the Revenue and six questions at the instance of the assessee, under section 256(2) of the Income-tax Act, 1961 (the Act) for the opinion of this court. R. A. No. 700/Ahd/1998 (by the Revenue) "Whether the Appellate Tribunal is right in law and on facts in allowing deduction of interest amounting to Rs. 38,92,769 under sec- tion 36(1)(iii) on the funds b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a unit being set up in Sinnar is not incorrect and contrary to record and as such it could not have been arrived at ?" 2. The assessee, a limited company, filed a return of income on December 31, 1993, showing nil income for the assessment year 1993-94. The relevant previous year is the financial year ended on March 31, 1993. The assessee claimed deduction of a sum of Rs. 38,92,769 which included various expenses comprised of 20 items as recorded by the Tribunal in paragraph 6 of its order. The Assessing Officer disallowed the same and hence the assessee carried the matter in appeal before the Commissioner (Appeals). However, the Commissioner (Appeals) confirmed the disallowance made by the Assessing Officer and hence the assessee pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue have been specifically negatived by the apex court and hence the Tribunal has rightly held that the interest was allowable deduction. 5. In the apex court's decision in the case of Deputy CIT v. Core Health Care Ltd. reported in [2008] 298 ITR 194, the apex court has stated (page 199) : "The expression `for the purpose of business', occurring in section 36(1)(iii), indicates that once the test of `for the purpose of business' is satisfied in respect of the capital borrowed, the assessee would be entitled to deduction under section 36(1)(iii) of the 1961 Act. This provision makes no distinction between money borrowed to acquire a capital asset or a revenue asset. All that the section requires is that the assessee must borrow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto service the proviso under section 36(1)(iii) of the Act. 7. In relation to the first three questions at the instance of the assessee, the only issue is whether the expenditure of Rs. 32,56,038 was in the capital field connected with the setting up of new unit or whether the expenditure was admissible as a deduction under section 37 of the Act. The contention on behalf of the applicant-assessee is that the assessee is engaged in the business of manufacturing and selling of ice cream and the unit is operating at Tarapur ; about 200 to 250 kms away from the existing unit an additional unit for procurement of milk and production of milk products was set up at the village Sinnar, District Nasik in the State of Maharashtra; that the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the case the amount related to expenditure other than interest is deductible as revenue expenditure under the provisions of section 37 of the Act ?" 10. In this connection, the Tribunal has recorded as under : "As regards question/issue No. (iii) we are of the opinion that the Commissioner of Income-tax (Appeals) was perfectly justified in holding that the expenditure other than interest which was admit- tedly related to the setting up of a separate unit at Sinnar for the pro- duction/procurement of milk and milk products was in the capital field and was rightly capitalised by the assessee in the books of account and was not admissible as deduction under the provisions of section 37 which specifically prohibit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oject for the production/ procurement of milk and milk products. In face of this finding, it is not possible to take any other view of the matter and no error can be found in the impugned order of the Tribunal in relation to the expenditure of Rs.32,56,038 incurred by the assessee as being capital expenditure which is not entitled to deduction under section 37 of the Act considering the plain language of the said provision. 13. In so far as questions Nos. 4,5 and 6 at the instance of the assessee are concerned, they relate to allowability of foreign travel expenses to the tune of Rs. 11,05,724. The finding of the Tribunal in this connection reads as under: "Coming to ground No. 4 relating to foreign travelling expenses of Rs. 11,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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