Bachangada Nachappa Monnappa Vs DCIT (ITAT Bangalore)
Plant & Machinery Can Be Capital Asset for the Seller but Stock-in-Trade for the Buyer — Interest of ₹7.42 Crore Allowed
The Bangalore Bench of the ITAT has held that the character of an asset must be determined with reference to the business and intention of the person acquiring it. Plant, machinery, land and building acquired from a company under liquidation may have been capital assets in the hands of that company, but they can constitute stock-in-trade or current assets in the hands of a buyer whose business is to purchase and resell such assets.
Consequently, interest paid on borrowings used for purchasing those assets was allowable u/s 36(1)(iii). The proviso requiring capitalisation of interest until the asset is first put to use was held inapplicable because the assessee had acquired the assets for sale and not for use in manufacturing.
The assessee, Bachangada Nachappa Monnappa, filed his return for AY 2023-24 declaring a total income of approximately ₹7.79 crore under the heads house property, capital gains and income from other sources. The case was selected for scrutiny because the assessee claimed a substantial business loss for set-off against income under other heads.
