TMI Blog2017 (1) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... period relevant to the assessment year under appeal. The only document i.e., building completion certificate on which the Ld. A.R. has placed heavy reliance could not support the case of assessee. The matter has travelled three stages. The assessee could not obtain the rectified or the correct building completion certificate either at the time of assessment or at the time of first appeal proceedings. Even during the second appeal stage, the assessee has filed the same document. There is no other document on record to substantiate the claim of assessee. Thus, we are of considered view that the building was not ready during the period under consideration. Under such circumstances, the interest paid and pre-payment charges paid by the assessee cannot be allowed as revenue expenditure. We do not find any infirmity in the order of ld. CIT(A) in rejecting the claim of the assessee and to treat the expenditure as revenue in nature - Decided against assessee - ITA No. 302/PUN/2014 - - - Dated:- 15-12-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Appellant : Shri Suhas Bora For The Respondent : Shri P.L. Kureel ORDER PER VIKAS AWASTHY, JM : The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . AR made an alternate submission that the amount not recoverable from the vendor may be allowed as business loss u/s. 28 of the Act. In respect of ground No.2, the Ld. AR submitted that the assessee had taken loan for acquiring the property (Hotel) from ICICI Bank Limited. The assessee had planned to expand the existing business. The construction of the said property was completed in the financial year 2008-09. The completion certificate dt.25.07.2008 is placed on record at Page 34 of the paper book. The interest expenditure on the loan was claimed by the assessee as business expenditure under Sec.37 of I.T. Act. Further, the bank had charged pre-payment charges on early closure of loan account. The said charge was also claimed as business expenditure. The Assessing Officer disallowed the claim of the assessee on the ground that interest expenditure and pre-payment charges were incurred for the acquisition of capital asset. The Assessing Officer further observed that since the assessee has not put the hotel to use, as no income has been shown from the use of asset, the said expenditure is not allowable in the year under consideration. The Ld. AR in order to substantiate his arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd if incidentally those expenditure benefits the other party, then no part of those expenditure could be disallowed on the ground that the assessee did not incur such expenditure wholly and exclusively for the purpose of its business exclusively for the purpose of its business. (i) CIT v. Chandulal Keshavia Co. (38 ITR 601) (SC) (ii) Sasson J. David and Co. Ltd v. CIT [118 ITR 261) (SC) (iii) Star India (P) Ltd V. Addl. CIT (2006) (103 ITD 73) (ITAT Mumbai) (TM) (iv) Maruti Countrywide Auto Finance Services [2011-TIOL-283] (ITAT Delhi) 5. It is also submitted, without prejudice to the above submission that all enduring benefits are not in the capital field. In this regards, the Appellant would like to draw your attention to the decision in case of DCII v. M/s. Edelweiss Capital Ltd. (ITA No. 3971/Mum/2009) ITAT, Mumbai. wherein, in the context of write-off of advances paid towards creating a website (which did not materialize), the Hon'ble ITAT, allowing such write-off as deduction, further observed that Even if the websites had materialized, the expenditure could not have been viewed as capital expenditure because the website is put up for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assets put to use in the Act includes active and passive use. In other words, the scope for claiming interest expenses in respect of loans which was acquired for assessee is also in line with the provisions of the Act. Merely because the acquisition of assets and which were not currently used by the he asset was not actively used in the relevant financial year does not denote that it was not available for use in that year. The assessee is therefore entitled to claim interest expense on assets which were not in active use. Reliance is placed on the following authorities in this regard: CIT vs. D.P. Khanna Sons (140 ITR 558)(P H), wherein it has been held that after arranging for the building, any steps taken by the entrepreneur to set the building into gear for running the unit, would be nothing but putting it to use . The assessee after purchase of the building at Chandigarh had installed electrical fittings to run the unit and was able to shift his business into the said building within a few months. There is thus no difficulty in holding that during this transitory period, the building purchased by the assessee had been used . The above principle has also b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used means actually used for the purposes of the business. The view is taken by the Tribunal. In this view of the matter, no substantial question of law is involved. The appeal is dismissed in limine with no order as to costs. In the above decision also it is clearly stated that the expression use and used bear two different meanings. The word used means actually used and the word use means ready to use. Proviso to section 36(1)(iii) of the Income Tax Act 1961 clearly states to that deduction of the interest paid, in respect of capital borrowed for acquisition of an asset shall not be allowed till the asset is put to use, which clearly states that if the asset is ready for use the Assessee is liable for claiming the expenditure of interest paid. 4. We have also relied on the decision in case of C.T. Desai v CIT (1979) 120 ITR 240 (Kar) . CIT v Associated Fibre Rubber Industries (P) Ltd (1999) 236 ITR 471 (SC) The relevant extract of C.T. Desai v (IT (1979) 120 ITR 240 (Kar) is as under:- On the facts of this case, there can be no doubt that the money was borrowed for the purpose of acquiring the leasehold right in a new theatre and, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kureel representing the department vehemently supported the findings of CIT(A) in rejecting the claim of assessee on both the grounds. The Ld. DR submitted that the assessee has not filed any evidence before the authorities below to show that the asset was ready to use. The Ld. DR pointed that the completion certificate at Page 34 of the paper book on which heavy reliance has been placed is dated 23.08.2003. The date on certificate seems to be wrong. It cannot be ascertained from the said document the date on which the building was ready to use. In respect of various case laws relied by the assessee, the Ld. DR submitted that all the case laws are distinguishable on facts and hence, the ratio laid down therein would not apply in the facts and circumstances of the present case. 5. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. We have also considered the written submissions filed by the assessee and the various case laws on which the Ld. A.R. has placed reliance to reinforce his submissions. In appeal the assessee has raised primarily two grounds. The first ground in appeal relates to disallowance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of business of banking or money lending, which is carried on by the assessee. Since none of the conditions envisaged u/s 36(2)(i) are satisfied in the present case, the assessee cannot claim the amount as bad debt. The assessee has incurred the expenditure on behalf of the vendor to make the hotel building encumbrance free. If the assessee is unable to recover the amount from vendor, the assessee can claim the said amount as loss while computing profits and gains of business of profession u/s 28 of the Act. 8. The Hon ble Rajasthan High Court in the case of CIT Vs. Anjani Kumar Company Ltd., (supra) allowed irrecoverable advance payment made by assessee for acquiring a capital asset which did not materialize as business loss. In the said case advance was paid for acquiring agricultural land to set up a factory. The acquisition of land did not materialize and the amount paid as advance was also not recovered by the assessee. The Hon ble Court held that if any asset is acquired and if it is benefit of enduring nature, then of-course assessee cannot get the deduction of amount for acquisition of asset as revenue expenditure. In a case where capital asset is not required an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete in every respect and was ready to use during the period relevant to the assessment year under appeal. The Ld. A.R. at the time of making submissions and even in written submissions has stated that the completion certificate is dated 25.07.2008. However a close scrutiny of building completion certificate at page 34 of the paper book shows that the same is dt.23.08.2003. The said date is mentioned at page 2 of the certificate. In all certainty the date is incorrect. On page 1 of the certificate, it has been stated that the building plans were approved vide office letter No/DB/1334/08 dt.25.07.2008. If the building plans were approved on 25.07.2008 then certainly building completion certificate would be subsequent to the said date. The Ld. A.R. could not place any other document to show that the building was complete in every respect and was ready to use during the period relevant to the assessment year under appeal. The only document i.e., building completion certificate on which the Ld. A.R. has placed heavy reliance could not support the case of assessee. The matter has travelled three stages. The assessee could not obtain the rectified or the correct building completion ..... 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