9911796707
TMI Blog2019 (11) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... Super Prime Construction Pvt. Ltd. as income from other sources without allowing the interest expenditure of Rs. 1,17,54,531/- incurred for earning such interest income. u/s 57(iii) of the Act by not accepting the contention of assessee that there is a direct nexus between the loan taken by it from Rajasthan Financial Corporation and the amount advanced to M/s Super Prime Construction Pvt. Ltd. 2. The assessee craves to amend, alter and modify any of the grounds of appeal. 3. The appropriate cost be awarded to the assessee." 2. The assessee company was incorporated om the year 1993 with main object of running hospital. For last many years, the assessee company has been running hospital located at Sector-5, Main Shipra Path, Mansarovar, Jaipur. However, during the year under consideration, the assessee decided to demolish old hospital and construct a new hospital. For construction of new hospital building, the assessee obtained loan from Rajasthan Financial Corporation (in short, the RFC) to the tune of Rs. 10.00 crores sanctioned on 26/6/2013. The said amount was advanced to M/s Super Prime Construction Pvt. Ltd. on which the assessee earned interest at Rs. 1,22,28,082/-. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC). However, in the said case, interest earned by the assessee and interest paid by the assessee was prior to the commencement of the business and further from the deposits made with banks, therefore, all specific facts, the Hon'ble Supreme Court held that interest income is taxable under the head income from other sources and interest payable on amount borrowed during the period will go to increase the cost of project. Whereas in the instant case of the assessee, the assessee has been doing this business since many years and for the A.Y. 2006-07 the assessment was completed U/s 143(3) and loss declared by the assessee was accepted by the A.O., therefore, this is not a case of interest expenditure prior to commencement of business. Thus, the ld AR has submitted that the decision relied upon by him are applicable on the facts of the present case when there is a direct nexus between the loan raised and advance given. 4. On the other hand, the ld DR relied upon the orders of the authorities below and submitted that the interest paid on the borrowed fund taken for construction of the hospital building cannot be allowed till this said building was put to use as per the provisions of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) who confirmed this addition by following the Judgments of the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemical & Fertilizers Ltd. Vs. 227 ITR 172. Further, Ld. CIT(A) followed the Judgments of the Hon'ble Supreme Court rendered in the case of CIT vs. Autocast Ltd. 248 ITR 110 (SC). There is no dispute with regard to the fact that the amount so credited is interest earned on money which was given by the assessee to Rajasthan State Mines and Minerals Ltd. in short RSMML a Government of Rajasthan Undertaking. We are unable to accept the submissions of the Ld. Counsel for the assessee, in view of the Judgments of the Hon'ble Supreme Court rendered in the case of CIT vs. Tuticorin Alkali Chemicals & Fertilizers Ltd. (Supra), CIT vs. Autocast Ltd. (Supra) Hon'ble Supreme Court in the case of CIT vs. Autocast Ltd. 248 ITR 110 (SC) following the ratio laid in the case of M/s Tuticorin Alkali Chemicals & Fertilizers vs. CIT held as under:- "The question that was before the High Court (see [1998] 229 ITR 789) read thus (page 790) "Whether, on the fact and in the circumstances of the case, the interest income is not assessable to tax in the hands of the appellant?" The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure incurred by the assessee in respect of payment of interest on the borrowed fund is allowable if the same is laid out or expanded wholly or exclusively for the purpose of making or earning such income. We find that when there is no dispute that the loan was taken for construction of the hospital i.e. for bringing an asset into existence then the interest on such loan till the asset is put to use has to be capitalized as per the decision of the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT (supra). On similar footings, when the said amount was to remain ideal with the assessee due to the reason that there was a delay in sanction of the building plan and borrowed fund could not be used for construction of the hospital then the interest received by the assessee has a direct nexus with the construction of the hospital and consequently it would be capitalized and to be used to reduce the cost of construction of the hospital. The Hon'ble Delhi High Court in the case of NTPC Sail Power Co. Pvt. Ltd. Vs CIT (supra) while considering an identical issue and held in para 10 as under: "10. It is no doubt correct that the proviso to sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
