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TMI Blog2015 (12) TMI 1224X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to as "the Act"). 1. The short issue which is required to be ad judicated in this appeal is that whether the ld. "Whether the Commissioner of Income Tax (Appeals) was justified or not in deleting the addition of Rs. 17,45,918 made under section 36(1)(iii) of the Act on account of interest paid on loan borrowed during the year under consideration. The assessment year involved is 2008-09 and the impugned order was passed by the ld. CIT(Appeals) on 16th November, 2011. Brief Facts of the Case 2. The assessee is a Private Limited Company, which is engaged in the business of running a hotel. During the year under consideration the assessee started major renovation of the hotel building and incurred an expense of Rs. 1,85,75,761/-. From t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- towards major renovation of the hotel building which is shown in the balance sheet as capital work in progress. The A.O. observed from the balance sheet that the appellant took fresh unsecured loan to the tune of Rs. 2,50,00,000/- (loan as on 31.03.2007 was Rs. 1,50,00,000/- and as on 31.03.2008 was Rs. 4,00,00,000/-). The A.O. also observed that except the capital work in progress there was no significant increase in the value of any other assets or reduction in value of any liability. He, therefore, concluded that the entire capital work in progress was carried out by utilising the fresh loan accepted during the year. The total interest incurred on such loan amounted to Rs. 19,70,630/-. He further observed that except the interest amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) refers to any amount of interest paid in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the Books of A/cs or not). So the determining factor for application of this proviso is - (1) There should be acquisition of an asset and (2) Such acquisition is for extension of existing business. In the instant case expenditure have been incurred for some repair and replacement work which included replacement of flooring and a lift and such replacements are for the smooth conduct of It he existing business and not for the extension of the existing business. Had there been addition of some new rooms or restaurants or some other new facility then it could have been treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts to capital expenditure and the Order passed by the ld CIT(A) is bases on conjecture and surmises and therefore liable to be set aside and order passed by the Ld. A.O. is to be confirmed. 6. Submissions on behalf of Assessee On the contrary it is argued by the Ld Counsel of the Assessee that the work carried by the Assessee is not disputed by the Ld. A.O. and there are no adverse material by which it can be established that the same amounts to extensions of existing business and the Ld. CIT(A) passed an reasoned order therefore liable to be affirmed.0020 Order with Reasons 5. We have heard the arguments of both sides and also perused the relevant material available on record. The ld. Addl. CIT (D.R.) for the Revenue has contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rried by the Assesses can not be treated as extension of existing business. Contention of Ld D.R that the work carried out by the Assessee was certainly in the nature of extension of business because the value of business and property would be increased and it amounts to capital expenditure having no essence and not tenable under the facts and circumstances as demonstrated and evident. There fore, taking all facts and circumstances into consideration, We are of the opinion that the work undertaken by the appellant does not include acquisition of an asset for the purpose of extension of its business therefore, proviso to sec.36 (1)(iii) is not applicable in this case and the addition is not justified. On the aforesaid observation, we are inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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