TMI Blog2003 (1) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the Act of the Commissioner of Income-tax?" - we answer the above question in the affirmative, i.e., in favour of the assessee and against the Department. - - - - - Dated:- 15-1-2003 - Judge(s) : S. H. KAPADIA., J. P. DEVADHAR. JUDGMENT The judgment of the court was delivered by S.H. KAPADIA J.-This appeal is filed by the Department against the order of the Tribunal under section 260A of the Income-tax Act, 1961, in respect of the assessment year 1987-88. Facts: The assessee-company was engaged in the business of construction of buildings. As stated above, we are concerned with the assessment year 198788. The assessee followed the mercantile system of accounting. The assessee followed a modified project completion method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been allowed; that it was not a revenue expenditure because it was a loan raised for acquiring a capital asset and, therefore, the interest incurred cannot form part of capital expenditure. Accordingly, the Commissioner of Income-tax cancelled the assessment order disallowing the interest of Rs. 14.09 lakhs. Being aggrieved, the assessee preferred appeal to the Tribunal, which, following its earlier decision, held that the interest paid by the assessee cannot be treated as capital expenditure. Accordingly, the Tribunal restored the assessment order dated March 29, 1990. Being aggrieved, the Department has come by way of appeal to this court under section 260A of the Income-tax Act. On the above facts, the following question of law ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t incurred thereon constituted part of capital expenditure. This finding of the Commissioner of Income-tax was erroneous. In the case of India Cements Ltd. v. CIT [1966] 60 ITR 52 it was held by the Supreme Court that in cases where the act of borrowing was incidental to the carrying on of business, the loan obtained was not an asset. That, for the purposes of deciding the claim of deduction under section 10(2)(iii) of the Indian Income-tax Act, 1922 (section 36(1)(iii) of the present Income-tax Act), it was irrelevant to consider the purpose for which the loan was obtained. In the present case, the assessee was a builder. In the present case, the assessee had undertaken the project of construction of flats under the Kandivali project. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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