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TMI Blog2015 (2) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... interest received by the assessee cannot be treated as income from business and it has to be treated as income from other sources. Similarly the interest expenditure has to be capitalised. - Decided against assessee. - ITA No. 6786/Mum/2014 - - - Dated:- 27-1-2015 - Shri D. Manmohan, J. For the Appellant : Shri Toral Shah For the Respondent : Shri Vijaya Kumar Bora ORDER Per D. Manmohan, V.P. This appeal by the assessee-company is directed against the order passed by the CIT(A)-12 Mumbai and it pertains to AY 2005-06. 2. Assessee raised the following grounds before the Tribunal: - 1. The Hon'ble CIT(A) erred in concluding that the business activity had not yet started and treating inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the course of assessment proceedings the assessee was called upon to explain as to why interest income should not be treated as income from other sources and at the same time why interest paid should not be capitalised. In response thereto the assessee submitted that the company had come into existence for carrying on real estate and construction activities. Accordingly there was a proposal sometime in November/December 2004 for acquiring an industrial shed in Mathuradas Mill s compound. In order to finalise the deal some funds were required. Accordingly the company borrowed funds to advance the same for acquiring the property. On account of some controversy over the title of the said property there was delay in finalising the deal. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2,69,680/-. 5. Aggrieved, assessee contended before the CIT(A) that the interest income is earned on temporary advancement of funds and hence it ought to have been treated as income from business. It was also contended that the assessee having commenced the business, the expenditure in the form of payment of interest should be treated as normal business expenditure, allowable under section 36 of the Act. Reliance was placed upon several case law in this connection. 6. The learned CIT(A) considered the facts of the case, in the backdrop of case law relied upon by the assessee, and observed that as per the proviso to section 36(1)(iii) expenditure on account of interest paid in respect of capital borrowed for acquisition of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cals Fertilizers Ltd. 93 Taxman 502 is squarely applicable to the case in hand. Thus the decision of the AO was confirmed. 9. Further aggrieved, assessee is in appeal before the Tribunal. The learned counsel for the assessee strongly submitted that the case law relied upon by the Revenue are distinguishable on facts. The learned counsel adverted the attention of the Bench to pages 35 and 31 of the paper book to submit that during the previous year, relevant to assessment year under consideration, the assessee commenced its activity in the form of paying advance for purchase of property at Lower Parel and hence it has to be assumed that the assessee commenced its activity. When asked as to how the assessee advanced the idle funds prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad come up before the Bench. The ITAT, Hyderabad Bench has taken note of the decision of the Apex Court in the case of Tuticorin Alkalies Chemicals Fertilizers Ltd. and observed, on identical facts, that the interest received by the assessee cannot be treated as income from business and it has to be treated as income from other sources. Similarly the interest expenditure has to be capitalised. 11. The learned counsel for the assessee could not place any material to contradict the finding of the learned CIT(A). 12. It deserves to be noticed that the learned counsel for the assessee relied upon two decisions of the Hon'ble Delhi High Court, i.e. M/s. Dhoomketu Builders Development Pvt. Ltd. 216 Taxman 76 and Indian Oil Panipat P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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