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TMI Blog2025 (4) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... mbai, u/s. 143(3) of the Income-tax Act (hereinafter referred to as the "Act"), dated 15.12.2017 for Assessment Year 2015-16. 2. Grounds taken by the Revenue are reproduced as under: "1. On the facts and circumstances of the case and in law the Id. CIT(A) erred in allowing deduction claimed u/s 36(1)(iii) of the Act, on account of interest expenses on borrowed capital ignoring the fact that the capital borrowed by the assessee was not utilized for the purpose of business as the project under taken by the assessee vide Joint Venture Agreement dated 22nd March 2007, for which capital was borrowed, was got cancelled in the F.Y 2015-16. 2. On the facts and circumstances of the case and in law the Id. CIT(A) erred in allowing deduction clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer is justified in disallowing the expenditure claimed by the assessee on the ground that assessee allegedly did not carry out any business activity during the year under consideration. 3.2. In the total loss claimed by the assessee for the year, it includes interest on loans of Rs. 2,93,26,421/- against short term borrowings of Rs. 2,50,27,413/- and long-term borrowings of Rs. 35,16,83,341/- taken by the assessee. Details of the borrowings are extracted below: Particulars Amount (in Rs. ) Total Amount (in Rs. ) I) Long Term Borrowings: Unsecured term loan from the bank 2,50,27,413/- II) Short Term Borrowings: 1) Unsecured Loans and Advances from others: a) Int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tects for the development of the said property and incurred various other expenditures for the same. Assessee claimed that it has incurred various expense in respect of the project undertaken under the JDA aggregating to Rs. 6.74 Crores, which had been carried forward as loss for set off, duly reported in its return of income filed for the year under consideration, in Schedule-CFL. In the same Schedule, assessee also reported current year loss of Rs. 2,94,90,451/- for carry forward, thus the total loss carried forward to future years reported in the Schedule is Rs. 9,69,31,871/-. Assessee thus, claimed that it has started its business operation. 3.5. Ld. Assessing Officer adopted the view that assessee did not carry out any business activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merely not having revenue be the yard stick to decide the allowability of expenditure? 4.2. Assessee has not earned any revenue, but has included expenditure in the nature of interest and loans availed and various other expenses as tabulated above. Significant portion of the total loss claimed by the assessee in the year pertains to interest cost on the borrowed funds, which according to the assessee have been utilised for its project. The project undertaken by it forms part of its stock in trade and is not a capital asset and thus, it is an allowable deduction u/s. 36(1)(iii). There is no dispute in respect of borrowing of funds by the assessee. Also, all the facts are on record with corroborated documentary evidences to demonstrate that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had come up before the Hon'ble Court of Madras in the case of CIT(A) vs. Ceebros Hotels Pvt. Ltd. [2021] 131 taxmann.com 181 (Mad), fact of the case is extracted below: "The assessee-company was engaged in business of real estate development. During year, the assessee had obtained loan for the specific purpose of purchasing a land for starting a new residential project. It claimed interest paid on such loan as deduction under section 36(1)(iii). The Assessing Officer disallowed same on ground that since no activity had commenced in said new project and land was were not put to use, interest paid on loan borrowed for purchase of said land was to be capitalized and added back to work-in-progress account." 4.5. On these facts, the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X
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