TMI Blog2018 (7) TMI 953X X X X Extracts X X X X X X X X Extracts X X X X ..... per had already commenced and income offered to tax. We find no merit in the Revenue's objection that these are issues of fact, which this Court should not go into as the finding of fact, by the Tribunal is final. We have decided this issue on a question of law viz. applicability of Section 36(1)(iii) of the Act. - decided in favour of the appellant-assessee and against the respondent-revenue. - Income Tax Appeal No. 519 Of 2003 - - - Dated:- 4-7-2018 - M.S. SANKLECHA SANDEEP K. SHINDE, JJ. Mr. Swapnil Bangur with Mr. Niranjan Deshpande I/by Y.R.Shah for Appellant. Mr. Arvind Pinto, for the Appellant. P.C: This appeal under Section 260A of the Income Tax Act, 1961 (Act) challenges the order dated26.2.2003 of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 Lakhs was debited to profit loss account but was wrongly capitalized in the original return of income, as during the previous year relevant to the subject Assessment Year the work in the Lucky Shoppe project had commenced. This was not accepted on the ground that mere placing of orders would not amount to commencing of the project. Thus, not allowable as revenue expenditure. The alternate submission of the appellant that open plot of land in respect of 'Lucky Shoppe' forms stock-in-trade. Therefore, the interest paid on the loan taken to purchase open plot of land for Lucky Shoppe project is allowable as revenue expenditure being its stock-in-trade. This alternative submission was negatived by the Assessing Officer on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided is, whether the appellant can be said to have commenced work on Lucky Shoppe plot of land during the previous year relevant to subject assessment year. On facts it held that the appellant has not shown any work had commenced on 'Lucky Shoppe' project plot of land during the previous year relevant to the subject Assessment Year. Thus, it concluded that the assessing officer was justified in coming to conclusion that interest expenditure in respect of Lucky Shoppe project (plot of land) could not be allowed as revenue expenditure. Thus, the impugned order dated 26.2.2003 of the Tribunal allowed the Revenue's appeal and disallowed deduction of interest of ₹ 6.98 Lakhs in respect of 'Lucky Shoppe' project. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Lucky Shoppe project cannot be allowed as revenue expenditure. In any case, it is submitted that interest can only be allowed as a deduction if there is any income which is earned by the respondent-assessee. There is no income earned by the respondent assessee in respect of Lucky Shoppe project. 8 We note that before the Assessing Officer the appellant-assesse had made alternate submission to the effect that the plot of land which was purchased out of borrowed funds on which interest was paid, forms part of its stock-in-trade. Therefore, interest paid on purchase of stock-in-trade is to be allowed as revenue expenditure. This was negatived by the Assessing Officer on the ground that purchase of plot is necessarily capital in natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o distinction based on whether the borrowing is for purchase of capital asset or otherwise, interest was allowable as deduction in determining the taxable income. It was only after introduction of proviso to Section 36(1)(iii) of the Act w.e.f. 1.4.2004 that the purpose of borrowing i.e. acquisition of assets then interest paid would be capitalized. The Supreme Court in Dy. CIT v. Core Healthcare Ltd. 218 ITR 194 has held that prior to 1.4.2004 interest paid on borrowings for purchase of asset i.e. Machinery is to be allowed as a deduction under Section 36(1)(iii) of the Act. This even if the machinery is not received in the year of booking. It held that the restriction introduced in the proviso to Section 36(1)(iii) of the Act was effe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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