TMI Blog2022 (12) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... ture for the assessee. This situation would be akin to a situation wherein the assessee has borrowed working capital loans to procure stock and paid interest on such loans. In such a case, the interest costs are not to be capitalized with stock-in-trade but interest payment would become part of trading operations for the assessee and the same are allowable as revenue expenditure. The proviso to Sec.36(1)(iii) as introduced w.e.f. 01.04.2004 would apply only in situation wherein the capital has been borrowed for acquisition of fixed assets and not otherwise. The Hon ble Court Ceebros Hotels (P.) Ltd. [ 2021 (10) TMI 686 - MADRAS HIGH COURT] inter-alia, confirmed the stand of Tribunal that the term put to use in the proviso to Sec.36(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer [AO] u/s.143(3) of the Act on 24-12-2018. The revenue has filed concise grounds of appeal which read as under: 1. The order of the CIT(A) is contrary to law, facts and circumstances of the case. 2. Whether the Id. CIT(A) had erred in deleting the addition made u/s 36(l)(iii) by holding that the land is stock-in-trade, overlooking the rationale of the various case laws relied upon by the assessing officer which were discussed in the assessment order and especially in the wake of recent decision of jurisdictional high court in the case of M/s Mahindra World City Developers Ltd. V. Assistant Commissioner of Income Tax, Company Circle IV(1), Chennai (TCA Nos.245, 247 248 of 2019), where it has been held that- Mere purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the disallowance would not be justified as held by jurisdictional High Court in the case of CIT vs. Ceebros Hotels (P.) Ltd. (131 Taxmann.com 181; 05.10.2021). The copies of the decisions upon have been placed on record. Having heard rival submissions, our adjudication would be as under. Assessment Proceedings 4.1 The assessee being resident corporate assessee is stated to be engaged in civil construction. The assessee held land of Rs.853.52 Lacs and classified the same as current asset . The assessee paid interest of Rs.944.55 Lacs which led Ld. AO to compute disallowance u/s 36(1)(iii). The Ld. AO held that the assessee did not capitalize any interest on such loans in respect of land classified as current asset . 4.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be allowed as deduction whenever it is incurred. Further, the interest is to be capitalized only in case of fixed asset and not with respect to current asset , The assessee submitted that the land form part of stock-in-trade and therefore, any cost incurred in respect thereto would be revenue expenditure. The decision of Hon ble Bombay High Court in the case of Jayantilal Investments vs. ACIT (96 Taxmann.com 38) was referred to support the same. Concurring with assessee s submissions, Ld. CIT(A) allowed the issue in assessee s favor. Aggrieved, the revenue is in further appeal before us. Our findings and Adjudication 6. From the fact it emerges that the assessee is engaged in civil construction. As part of its business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the issue. 7. The case law of Hon ble High Court of Madras in CIT V/s Ceebros Hotels (P.) Ltd. (131 Taxmann.com 181) would also apply which has been rendered on identical factual matrix. The Hon ble Court, inter-alia, confirmed the stand of Tribunal that the term put to use in the proviso to Sec.36(1)(iii) would apply to capital assets / income earning apparatus facilitating the business activity and therefore, the statute envisages the importance of such capital asset should be put to use in the business in contradistinction to the inventory of the assessee. The decision of Bangalore Tribunal in DCIT vs. Cornerstone Property Investment (P) Ltd. (118 Taxmann.com 541) also support the view that interest paid on borrowed funds for acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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