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TMI Blog2014 (1) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the interest paid on the loan borrowed for purpose of purchase of plant and machinery is also to be deducted under Section 36(1)(iii) of the Act. 2. The assessee is a limited company carrying on the business and using facilities of telephonic connectivity for transfer of data in and out of the office. To improve this particular facility, it wanted to set up a V-Sat facility and paid site charges which are in the nature of licence fee for Bandwidth charges which are again in the nature of licence fee and DOT WPC fees, which is an annual fee. The amount that is paid is Rs.76,90,000/- for the entire period. The assessee claimed deduction of the said amount spent on the ground that it is a revenue expenditure. It also claimed deduction for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is filed by the Revenue. 3. The appeal was admitted to consider the following substantial questions of law: 1. Whether the Tribunal was correct in holding that the assessee who is carrying on the business of computer services had made an investment of Rs.53,50,641/- to start a telecom project should be treated as the business expenditure of the assessee even before the business in telecom had commenced? 2. Whether the Tribunal was correct in holding that a sum of Rs.23,39,359/- paid towards interest on plant and machinery purchased by the assessee should be treated as a revenue expenditure despite the same being added to the asset of the assessee? 4. The learned Counsel for the Revenue assailing the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of Rs.6,88,041.25 paise was spent for foreign travel; a sum of Rs.76.90 lakhs was spent towards DOT fees and charges; a sum of Rs.23.89 lakhs towards financing cost and the assessee claimed deduction of the aforesaid amount. The Assessing Authority proceeds on the assumption that the assessee has set up a new project for the first time in which, the assessee did not have any prior experience. They have entered into an agreement with HFCL Satellite Communications Limited, a service provider in the area of V-SAT communications and they have incurred the aforesaid expenditure. Therefore, it is a new project and not a part of the existing project or a business carried on by the Company with advanced technology. 7. The amount spent resulte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is calculated to effect from a practical and business point of view rather than upon the juristic classification of the legal rights, if any, secured, employed or exhausted in the process. The question must be viewed in the larger context of business necessity or expediency." 9. In the case of Scales -vs- George Thompson & Co.Ltd. reported in (1927) 13 T.C. 83,89 (K.B.), dealing with the test for determining whether the two constitute the same business or different businesses, it is held what the Court has to look is, was there any inter-connection, any inter-lacing, any inter-dependence, any unity at all embracing those two businesses? That inter-connection, inter-lacing, interdependence and unity are furnished in a case by the existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -Tax - vs- Core Health Care Limited reported in (2008) 298 ITR 194 (SC) has held as under: "Section 36(1)(iii) of the Act, 1961, has to be read on its own terms: It is a code by itself. It 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 capital and the purpose of the borrowing must be for business which is carried on by the assessee in the year of account. Unlike section 37 which expressly excludes an expense of a capital nature. The Legislature has, therefore, made no distinction in section 36(1)(iii) between "capital borrowed for a revenue purpose" and "capital borrowed for a capital purpose". An assessee is entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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