TMI Blog2016 (6) TMI 1043X X X X Extracts X X X X X X X X Extracts X X X X ..... venue Disallowance of interest under Section 36(1)(iii) - Held that:- Once it is established that there is nexus between the expenditure and purpose of business, revenue cannot justifiably claim to put itself in arm chair of businessman or in position of Board of Directors and assume role to decide how much is reasonable expenditure having regard to the circumstances of the case.- Decided against revenue - ITA No. 680 of 2010 - - - Dated:- 16-3-2016 - Ajay Kumar Mittal And Raj Rahul Garg, JJ. For the Petitioner : Ms. Urvashi Dhugga, Advocate, Mr. Ajay Vohra, Sr. Advocate with Mr. Rohit Jain, Advocate For the Respondent : Mr. Ashim Aggarwal, Advocate ORDER Ajay Kumar Mittal, J. 1. This order shall dispose of ITA Nos.680, 730 of 2010 and 288 of 2011. ITA No.680 of 2010 has been filed by the revenue and ITA No.730 of 2010 has been filed by the assessee against the same assessment order dated 24.9.2009, Annexure A.III for the same assessment year i.e. 2005-06 whereas ITA No.288 of 2011 has been filed by the assessee against the order dated 28.2.2011, Annexure A.3 for the assessment year 2006-07. The facts have been extracted from ITA No.680 of 2010. 2. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24, 21,587/-, interest of ₹ 50,000/- as capital expenditure and ₹ 5 lakhs on account of personal and inadmissible expenses). Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 15.10.2008, Annexure A.II, the CIT(A) partly allowed the appeal of the assessee giving relief on disallowance of expenditure incurred on repair and renovation of building at Lajpat Nagar amounting to ₹ 33,64,107/- (i.e. 50% of ₹ 67,28,214/-) and relief on account of disallowance of interest under section 36(1)(iii) - ₹ 7,26,477/- (out of ₹ 24,21,587/-) and also a relief of ₹ 15,000/- out of ₹ 50,000/- was given. Aggrieved by the order, the revenue as well as the assessee filed appeals before the Tribunal. The Tribunal vide order dated 24.9.2009, Annexure A.III partly allowed the appeal of the assessee and dismissed the appeal filed by the revenue observing that expenses of ₹ 67,28,214/- incurred for the purpose of renovation of Lajpat Nagar Hospital, New Delhi were of revenue nature. In the matter of disallowance of ₹ 24,21,587/- made by the Assessing Officer on account of cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned DR in the course of hearing before us has not disputed the above factual conclusion recorded by the CIT(A) on the basis of any cogent material. Moreover, even the details of the expenditure as stated before us do not lead us to infer that such expenditure has been incurred for construction of a new hospital..... 8. It is not in dispute that the above expenditure had been incurred on the hospital building which has been taken on lease by the assessee under an agreement dated 25.2.2004 between assessee (party of the second part) and Malhotra Heart Institute Medical Research Centre Pvt. Limited (Party of the first part)........... 10. On consideration of the above provisions, we find that what has to be disallowed is capital expenditure. However, in the instant case, expenditure is towards repair of hospital and not capital expenditure. ...... 15. From the above said judicial pronouncements, an irresistible conclusion is that where the expenses are incurred by the assessee towards repairs of the premises taken on lease so as to make it fit for its business activity, such expenditure would fall within the expression of repair as appearing in section 30(a)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency. 27. No doubt, as held in Madhav Prasad Jatia v. CIT [1979 (118) ITR 200 (SC)], if the borrowed amount was donated for some sentimental or personal reasons and not on the ground of commercial expediency, the interest thereon could not have been allowed under section 36(1)(iii) of the Act. In Madhav Prasad's case [1979 (118) ITR 200 (SC)], the borrowed amount was donated to a college with a view to commemorate the memory of the assessee's deceased husband after whom the college was to be named, it was held by this court that the interest on the borrowed fund in such a case could not be allowed, as it could not be said that it was for commercial expediency. 28. Thus, the ratio of Madhav Prasad Jatia's case [1979 (118) ITR 200 (SC)] is that the borrowed fund advanced to a third party should be for commercial expediency if it is sought to be allowed under section 36(1)(iii) of the Act. 29. In the present case, neither the High Court nor the Tribunal nor other authorities have examined whether the amount advanced to the sister concern was by way of commercial expediency. 30. It has been repeatedly held by this court that the expression for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X
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