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M/s. TNQ Books and Journals Pvt. Ltd. Versus The Assistant Commissioner of Income Tax, Company Circle –I II (2) , Chennai and Vica-Versa

2016 (2) TMI 737 - ITAT CHENNAI

Disallowance of interest paid on the loan - loan applied for acquisition of the land until the date of construction of the building was completed by holding that the same has to be capitalized - Held that:- We find force in the contention of the learned AR. Since the land was handed over for construction on the very same day it was purchased, it is obvious that the land was put to use for the purpose of business of the assessee. Hence the interest attributable for purchase of the land should be .....

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in the category of “plant”. On perusing the facts of the case, we find the decision of learned CIT(A) to be justified because the Special Bench of the Tribunal (supra) has categorically held that with effect from 01.04.2003 “computer software” has to be classified as “tangible asset” under the heading ‘plant’ as mentioned in Appendix I to Income Tax Rules, 1962. Therefore we do not find it necessary to interfere with the order of the CIT (A) on this issue.- Decided against revenue - I .T.A.No.75 .....

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assessment year 2010-11. 2. The concised grounds raised in these two appeals are listed here-in-below for adjudication. 2.A Assessee s Appeal : (i) The Ld. CIT(A) has erred in confirming the disallowance of interest paid on the loan to the extent it was applied for acquisition of the land until the date of construction of the building was completed by holding that the same has to be capitalized. 2.B. Revenue s Appeal: (ii) The Ld. CIT(A) has erred by holding that depreciation is allowable to sof .....

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4. Ground No.1 - Disallowance of depreciation under section 36(1)(iii) of the Act:- It was noticed by the learned Assessing Officer that assessee had capitalized interest expenditure in the case of VSI property for ₹ 13,93,971/- being the interest paid on the bank loan for construction of building amounting to ₹ 2,08,18,308/-. However, it was opined by the learned Assessing Officer that interest expenses incurred for acquisition of land has also to be capitalized till the date of co .....

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Ltd. constructed the building for us. The building was handed over to us on 31st August, 2009. Thereafter we fitted out the building and occupied it on 5th December, 2009. In order to finance the acquisition, we took two medium term loans from Citi Bank via MITL 421397 for ₹ 5.5 crores and MITL - 421489 for ₹ 2.4 crores. The loans were repaid in full ahead of schedule on 25.03.2010 and 22.02.2010. The ledger accounts of these two loan accounts are enclosed. The interest paid on thes .....

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capital asset, all such costs incurred till the date of capitalization / put to use are to be added to the cost of such capital asset. In the instant case, the assessee has chosen to capitalize the interest in the case of the building (a depreciable asset) and on the other hand, claim the interest expenditure incurred for the acquisition of land (nondepreciable asset) as revenue expenditure. Such double standards are neither admissible nor permissible under the accounting standards of the Incom .....

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ld that the interest expenditure for the acquisition of land amounting to ₹ 40,31,149/- is capital in nature and accordingly the same is added to the cost of land. 5. On appeal, the learned CIT(A) confirmed the order of the learned Assessing Officer by holding as under:- It is the submission of the appellant that the land and building at VSI Estate was related to the existing business of the company. Proviso to section 36(1)(iii) is therefore applicable to the case of the appellant. The pr .....

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d by the Assessing Officer in the assessment order the date of first use of land can be taken as date on which the building constructed on the land was first put to use. As the facts of the case of the appellant are squarely covered by the proviso to section 36(1)(iii) the disallowance of interest expenditure of ₹ 40,31,149/- made by the Assessing Officer in the assessment order is sustained. The grounds are dismissed. 6. The learned Authorized Representative submitted before us that immed .....

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