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COMMISSIONER OF INCOME TAX Versus MARDIA STEEL LTD. (IN LIQUIDATION)

2016 (7) TMI 963 - GUJARAT HIGH COURT

Disallowance made u/s 36(1)(iii) out of preoperative expenses - Held that:- As decided in Commissioner of Incometax, Baroda v. Ishwar Bhuvan Hotels Ltd. [2008 (2) TMI 4 - SUPREME COURT OF INDIA] Interest paid in respect of borrowings on capital assets not put to use in the concerned financial year can be permitted as allowable deduction u/s 36(1)(iii) of the I.T. Act, 1961 - Decided in favour of assessee - TAX APPEAL NO. 23 of 2007 - Dated:- 13-7-2016 - MR. KS JHAVERI AND MR. G.R.UDHWANI, JJ. FO .....

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ng the disallowance of ₹ 36,30,000/- made u/s 36(1)(iii) out of preoperative expenses ? 3. Learned Counsel for the assessee has submitted that the question raised in this appeal is squarely covered by a decision case of Deputy Commissioner of Incom-tax v. Core Health Care Ltd. [2008] 167 TAXMAN 206 (SC) and placed reliance upon the following paragraphs: 13. In our view the above observations have to be confined to the facts in the case of Challapalli Sugars Ltd. (supra). It was a case wher .....

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Act has to be read on its own terms. It is a Code by itself. Section 36(1)(iii) is attracted when the assessee borrows the capital for the purpose of his business. It does not matter whether the capital is borrowed in order to acquire a revenue asset or a capital asset, because of that the section requires is that the assessee must borrow the capital for the purpose of his business. This dichotomy between the borrowing of a loan and actual application thereof in the purchase of a capital asset, .....

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he decision of the Bombay High Court in Calico Dyeing & Printing Works (supra) and the judgment of the Supreme Court India Cements Ltd. (supra) have been given with reference to the borrowings made for the purposes of a running business, while the decision of the Supreme Court in Challapalli Sugars Ltd. (supra) was given with reference to the borrowings which could not be treated as made for the purposes of business as no business had commenced in that case. Therefore, there is no inconsiste .....

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ssed Civil Application Nos.53 and 54 of 2001 filed by the Department. It may be noted that during the pendency of Tax Appeal Nos.449 and 450 of 2000, the Department had moved the above two civil applications for amendment of its Memo of Appeal raising substantial questions of law, namely (a) whether advertisement expenses incurred by the assessee to create a brand image with enduring benefit are allowable as revenue expenditure; (b) whether the Tribunal had erred in granting deduction under Sect .....

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