TMI Blog2017 (11) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... ney cannot be disallowed. CIT(A)’s observation that these plots were not utilized for the purpose of business is misplaced. The P&L account of assessee shows that the assessee was paying go-down rent of ₹ 6,90,366/- for the year under consideration F.Y 2012-13. Subsequently it was reduced to ₹ 3,29,264/- (F.Y 2013-14), which is evident from page No. 13 and 15 of the paper book respectively. Further the fixed assets schedule also shows that the assessee has spent on construction ₹ 16,01,000/- on these plots during the year under consideration. These plots are being utilized for the business purposes. The disallowance of interest on borrowed money was not justified as the money was utilized for business purposes only. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The brief facts of the case are that the appellant was engaged as a trader/commission agent of Khal. During the year under consideration, it has purchased plot no. 15-16 in Mohit Nagar Vistar, Sarana Doongri, Jaipur admeasuring (611.11+ 850.42) 1461.53 sq yards for ₹ 31,68,995/-. During the assessment proceedings, it was observed by the AO that the appellant has obtained net fresh deposit of ₹ 1,28,23,673/-and has paid net interest of ₹ 34,67,957/-. It was concluded by the AO that the capital borrowed to the extent of ₹ 31,68,995/- were used for acquiring the capital assets which were not put to use during the year under consideration and hence the AO has disallowed proportionate interest of ₹ 2,37,675/- and ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act is for the purpose of business and the entire funds on which interest were paid is directly and incidentally infused for business purpose. It is well established proposition that when the revenue fails to establish any nexus between the borrowed funds and the funds diverted/lent, any denial of allowances of interest under Section 36[ 1 ] (iii) is not permissible. It was the contention of the appellant that the proviso to section 36(1) (iii) was amended w.e.f. 1.4.2016 by deleting the words for extension of existing business or profession and in the relevant assessment year i.e. AY 12-13, being prior to amendment effective from AY 2016-17, the deduction was allowable for extension of business profession. In support of its con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no addition to these plots in terms of boundary wall etc. and the appellant has incurred a sum of ₹ 16,01,000/- thereof in the FY 2012-13 i.e. the plots purchased by the appellant could not be used for the purposes of the business of the appellant during the year under consideration. It may be mentioned that in the case of Breeze Constructions (P.) Ltd. Vs ITO [2012] 21 taxmann.com 114 (Delhi), it was held by the Hon ble ITAT that: A reading of section 36(1) ( H i ) makes it amply clear that interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession; for any period beginning from the dote on which the capital was borrowed for acquisition of the asset t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e- year under consideration. ( vii) Thus, in view of the above discussion and looking to the facts and circumstances of the case, it is held that the AO was justified in making disallowance of ₹ 2,37,675/- out of the interest expenses claimed by the appellant. Hence, this ground of appeal is hereby rejected. 5. I have heard both the sides on this issue. From the facts of the case, it is clear that the assessee has achieved the turnover of ₹ 10,08,23,511/- and the declared the gross profit rate @ 5.96%, which is higher than the immediate preceding year when it was 3.15% only. The purchase of the plot was to expand the business of the assessee to make go-down as the assessee was paying rent on the go-downs. Thus, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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