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TMI Blog2016 (5) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... is allowable as business expenditure in terms of sec. 36(1)(vii). In view of the facts, we see no justification to disallow the interest and brokerage charges paid by assessee as mentioned above which is wholly and exclusively incurred for the purpose of business and is allowable under section 36(1)(vii) besides, the assessee having own interest free funds more than ₹ 3.04 crores which is more than the investment in question. Even alternatively the assessee’s claim for interest and finance charges cannot be disallowed. - Decided in favour of assessee - ITA No. 47/JP/2014 - - - Dated:- 30-3-2016 - SHRI R.P. TOLANI, JM SHRI VIKRAM SINGH YADAV, AM For The Assessee : Shri Manish Agarwal, (C.A.) For The Revenue : Shri Raj M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance has been made by sweeping observations. In view thereof, disallowance of ₹ 54,286/- is deleted. 3. Apropos ground nos. 2 3 are inter-connected. Assessee purchased a piece of land claiming to be for the purpose of construction of a factory building and godown thereon for the purpose of her business. The said land was purchased for ₹ 1,15,00,000/- and after including cost towards registration charges etc. the total value debited in the books of account was of ₹ 1,25,29,580/-. During the year under appeal, the assessee has paid interest of ₹ 75,12,338/- on the borrowed funds as shown in the balance sheet and further paid brokerage of ₹ 3,51,678/- on the finance. The ld. AO alleged that the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settled law, the AO was obliged to establish the nexus between the borrowed funds and the payment of consideration for purchase of land. However, the ld. AO had miserably failed to prove any sort of nexus between borrowed funds and the purchase of said land, especially when the assessee was having at her disposal sufficient amount of interest free funds to meet out the payment of consideration towards purchase of said commercial land. Thus the ld. A/R submitted that the AO has failed to even show/indicate any nexus of whatsoever nature between the borrowed funds and payment of consideration for purchase of said land; and without establishing any such nexus merely on assumptions and presumptions, the AO has treated a sum of ₹ 22,55,324 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng year and were already applied in the business. The increase in the borrowed funds are also applied in the current assets, therefore, it is clearly established that the borrowed funds are not applied in the acquisition of the land in question. The ld. A/R contended that the AO as well as ld. CIT (A) have failed to consider this aspect before arriving at the conclusion that borrowed funds were used for purchase of new commercial land. In support of his contention, the ld. A/R relied on the following judgments :- Munjal Sales Corporation vs. CIT Others 298 ITR 298 (SC) CIT vs. Hotel Savera 239 ITR 795 (Mad.) CIT vs. Radico Khaitan Ltd. 142 Taxman 681 (All.) Comet Handicrafts vs. ACIT 114 TTJ 124 (ITAT Delhi Bench) CIT vs. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds that the investment in question has been shown in the assessee s balance sheet pertaining to its business towards acquisition of a business asset. There was no other use for the assessee to purchase such land. The assessee is in the business of iron and steel and to have future plan for expansion of business cannot be assumed to be a non business activity. Therefore, there is no justification in the inference drawn by authorities below that the land was purchased for non business purposes. Such inference being without any supporting or probabilities, cannot be sustained. The assessee s version is to be accepted unless it is controverted by cogent reasons and evidence. Thus the allegation in this behalf is untenable. 4.4. In the case l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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