TMI Blog2020 (11) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the assessee in the case of Ferro Alloys Corporation Ltd. Vs. CIT [ 1991 (12) TMI 39 - BOMBAY HIGH COURT] - Decided in favour of the revenue. - I.T.A. No. 2237/Mum/2019 - - - Dated:- 28-10-2020 - M. Balaganesh , Member ( A ) And Amarjit Singh , Member ( J ) Assessee by : None Revenue by : Shri O. P. Meena (Sr. AR) ORDER Amarjit Singh , Member ( J ) The assessee has filed the present appeal against the order dated 18.12.2018 passed by the Commissioner of Income Tax (Appeals)-24, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y. 2014-15. 2. The assessee has raised the following grounds of appeal:- 1. The learned Commissioner of Income Tax (Appeals)-24. Mumbai has erred in confirmin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal relating to the AY 2012-13 on same grounds was dismissed by him without considering the facts of the case. 4. For the above and other grounds that may be adduced at the time of hearing the appeal may be allowed to the extent prayed for in the grounds of appeal. 3. The brief facts of the case are that the assessee filed its return of income on 27.09.2014 declaring total loss to the tune of Rs. (-)60,89,580/-. The return was processed u/s. 143(1) of the Act. Thereafter, the case was selected for scrutiny. Notices u/s. 143(2) 142(1) of the Act were issued and served upon the assessee. The assessee company was engaged in the business of Activities related to agriculture, sericulture, horticulture, aquaculture. The assessee took ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rival submissions and perused the relevant materials on record. In the instant case, the assessee-company was incorporated for the purpose of carrying on real estate activities as per its main objects in the 'Memorandum of Association'. This is the second year of operation. We find that the assessee purchased land in the first year of operation for an amount of ₹ 4,94,38,159/-, which was financed out of unsecured loan obtained from the directors amounting to ₹ 5,35,20,000/- outstanding as at 31.03.2011. The assessee paid interest on the above loan @ 10% and the borrowing has been effected for the purpose of its business. In the case of Tetron Commercial Ltd. (supra), the assessee company purchased some immovable pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the interest paid on the amount borrowed for the purchase of such machinery is an amount deductible, once the other ingredients are fulfilled. It is shown in the balance sheet under the capital and asset heading as an asset but not a stock-in-trade. The description in the books of account would be immaterial. If it is a stock-in-trade, in that event, the amount invested would be a revenue expenditure and not a capital expenditure. The amount borrowed may be utilized for the purpose of acquisition of stock in-trade or for the purpose of acquisition of capital assets. So long the money is utilized for business purposes, the interest is allowable as deduction. It is well-settled that business expenditure is not confined to expenses incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat asset into existence; the transaction of borrowing is not the same as the transaction of investment and if this dichotomy is kept in mind, it becomes clear that the transaction of borrowing attracts the provisions of section 36(1)(iii) of the Act. As mentioned earlier the assessee filed before the AO the confirmation of loan from the directors in response to the written query dated 29.09.2014 issued by the AO u/s. 142(1) of the Act. The assessee company had effected purchase of land in the first year of operation i.e. from 07.05.2010 to 31.03.2011 for an amount of ₹ 4,94,38,159/-, which was financed out of unsecured loan obtained from the directors amounting to ₹ 5,35,20,000/- outstanding as at 31.03.2011. The interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest levied under section 215 of ₹ 1,38,506 and interest levied under section 201(1A) of ₹ 66,590 was rightly rejected as not allowable under section 37 of the Income-tax Act, 1961, for assessment year 1976-77? 2. The assessee was required to pay the following amounts as interest. ₹ 6,03,168 under section 220(2). ₹ 1,38,506 under section 215, and ₹ 66,590 under section 201(1A) of the Income-tax Act. These amounts were claimed as business expenditure under section 37 of the Income-tax Act. The Income-tax Officer, the Commissioner in first appeal and the Tribunal in second appeal, rejected the said claim as not allowable under section 37 and it is against the above basic undisputed background t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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