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TMI Blog2016 (9) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... recoverable in cash or in kind), which has been increased by ₹ 8,44,28,188/- in asset side of the balance sheet and in schedule 2, secured loans has been enhanced by ₹ 8,17,55,868/- at liability side in the balance sheet. The company has paid interest & processing charges on this loan to the bank. The interest paid is allowable u/s. 36(1)(iii) of the IT Act for purchase of asset only when such assets are first put to use in the business. It is clear from the audited accounts of the company and submissions made before the lower authorities that the aforesaid term loan has been given as advance for purchase of land. However, the record reveals that no such land stood purchased by the assessee company. Therefore, once the asset in the form of land, for which the assessee is said to have given the advance, does not stand proved in possession of the assessee, there is no question of its use for the purpose of business. Only advancing the money for acquisition of asset does not qualify the deduction of interest unless the said asset is acquired by the assessee company and is put to use by it for the purpose of business. In the instant case, no such circumstances exist. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the facts of the case. 2. The brief facts of the case are that the assessee company is engaged in the Real Estate business as emanated from the order of the Assessing Officer. It filed return of income declaring nil income. The case was selected for scrutiny and statutory notices were issued and served. On scrutiny of accounts, the Assessing Officer noted that there were no any purchase and sale done during the year. Only opening and closing balances have been shown during the year. A sum of ₹ 33750/- has been capitalized himself towards pre-operative expenses and it has been added into the closing stock/WIP. The resultant figure of closing stock, thus, comes to ₹ 12,91,42,197-50. On perusal of profit and loss account, the Assessing Officer found that the assessee has claimed expenses in the profit and loss account of director s remuneration of ₹ 3,60,000/-, interest on bank loans of ₹ 96,67,557/- and processing charges on loans of ₹ 25,00,000/- and administrative expenses of ₹ 3,34,360/-, totaling to ₹ 1,28,61,917/-. The ld. Assessing Officer disallowed these expenses stating that these expenses are not related to the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT vs. Jaypee DSC Ventures Ltd., 335 ITR 132 (Del.) wherein it was held that the interest income earned by the assessee on FDR was business income. The FDR given for obtaining the license from HUDA as per their requirement, therefore, cannot be deemed for the purpose other than business. The interest income earned by the assessee on FDR should be netted with the interest paid by the assessee. The assessee has obtained loan for the purpose of business. Therefore, all the expenses related to the bank loan should be allowed as business expenditure. The assessee is a company registered with Registrar of Companies. It has obtained certificate of commencement of business. Therefore, the company is carrying on the business for the purpose for which it was incorporated. Therefore, the expenditure incurred by the company is business expenditure. He has relied on the decision of Bokaro Steels 236 ITR 315. With regard to disallowance u/s. 14A, the ld. AR relied on the decision of Hon ble High Court in his own case for the assessment year 2008-09 as noted above. 7. The ld. DR relied on the orders of the authorities below. He further submitted that there was no any business activity on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which are disclosure part of the auditor s report u/s. 301 of the Companies Act, 1956. In Annexure-A, placed at paper book page 9, the Company has given substantial amount of advances to DD Township Ltd. of ₹ 9,09,45,523.07. On paper book page 20, the DD Township Ltd. has been classified under the transaction with related parties and this company has been given advance. The appellant has taken term loan from Union Bank of India, which is clear from paper book page 21. This advance has been given to DD Township Ltd. for purchase of land. The appellant has filed before the Assessing Officer the source of loan and its utilization, in which he has clearly stated that the loan has been given for the purchase of land whereas no land has been purchased during the year. The term loan has been taken from Union Bank of India and the same has not been utilized for the purpose of business. After analyzing the balance sheet of the company, we find that there is no vast difference between the figures of balance sheet as compared to the previous year except schedule-9 relating to loans and advances (advances recoverable in cash or in kind), which has been increased by ₹ 8,44,28,188 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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