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COMMISSIONER OF INCOME TAX Versus M/s. MARDIA STEEL LTD

2016 (7) TMI 330 - GUJARAT HIGH COURT

Disallowance of pre-operative expenses - nature of payment of interest on loan taken for expansion of the Steel Project - Held that:- Considering the decision of this Court in the case of Gujarat State Fertilizer and Chemicals Ltd. (2008 (8) TMI 313 - GUJARAT HIGH COURT) the question, which is raised in the present appeal is required to be answered in favour of the assessee. We are not giving any elaborate reasons for the same as in the case of Gujarat State Fertilizer and Chemicals Ltd. (Supra) .....

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Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench C (hereinafter referred to as ITAT) dated 01.06.2006 in ITA No. 802/Ahd/2002 for the Assessment Year 1997-98, the revenue has preferred the present Tax Appeal for consideration of the following substantial question of law: Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) deleting disallowance of ₹ 14,09,5 .....

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nditure as revenue expenditure and deleted the addition. On appeal before the ITAT by the revenue, by impugned judgment and order, ITAT confirmed the order passed by CIT(A) and dismissed the appeal. Being aggrieved and dissatisfied with the impugned judgment and order passed by the ITAT, the revenue has preferred the present Tax Appeal for consideration of the aforesaid substantial question of law. 3. Ms. Mauna Bhatt, learned advocate appearing for the revenue submitted that the said expenditure .....

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undisputed fact that the said interest was directly related to the acquisition of the asset and the same was not put to use and hence the same needs to be capitalized with the cost of acquisition of the asset. 4. Mr. Bhargav Hasurkar, learned Counsel appearing on behalf of the respondent has submitted that as such the issue involved in the present Tax Appeal is now not res integra in view of the decision of this Court in the case of Gujarat State Fertilizer and Chemicals Ltd. vs. Assistant Comm .....

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arely applicable to the facts of the present case. The Hon'ble Supreme Court in that case has held that Section 36(1)(iii) of the Income-tax 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 Se .....

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owed capital provided that the capital is used for business purpose irrespective of what may be the result of using the capital which the assessee has borrowed. Actual cost of an asset has no relevancy in relation to section 36(1)(iii) of the Act. Applying the ratio of the decision of the Supreme Court to the facts of the present case and considering that there is no dispute about the fact that the capital borrowed was used for the purpose of business and whether it is for the capital purpose or .....

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