Case Law Details
ACIT Vs Chinsha Property Pvt Ltd. (ITAT Mumbai)
Since the company was engaged in the business of real estate, property in Tulsiwadi was acquired for redevelopment. Hence, commercial expediency/business purpose assessee had invested ₹.11.25 Crores in the project. Therefore, interest cannot be disallowed. Ld. DR submitted that Assessing Officer disallowed the interest observing that assessee had diverted its interest bearing loans to M/s. Joyous Housing Ltd., for non-business purpose and without any commercial expediency and therefore the same was disallowed u/s.36(1)(iii) of the Act. Ld. DR submitted that Ld.CIT(A) after following the decision of the Tribunal in its own case for the A.Y.2010-11 and 2011-12 deleted the disallowance made by the Assessing Officer. Ld. DR vehemently supported the orders of the Assessing Officer.
The relevant portion of the decision of the Hon’ble ITAT, Mumbai for assessment year 2010-11 is reproduced herein as follows :-
“Apart from that further amount of Rs. 11.25 crores was funded which was over and above subscription and acquiring of shares which was in the form of interest free. The business of the Joyous Holding Ltd. has already been set-up and commenced. Such a fund deployed out of the interest bearing loan was wholly for the purpose of business of Joint Venture which was to develop project because the assessee was in the business of real estate and earning income therefrom. Further, the assessee was entitled for profit of Rs. 42 crores from the said business, which was stated in the MOU itself. All these aspects have been dealt by the CIT (A) and finding of fact has been given that the said funds were utilized wholly for the business purpose and for the commercial expediency and therefore, any interest paid on such fund has to be allowed as “business expenditure” u/s 36 (l)(iii). Finding recorded by the learned CIT (A) is thus affirmed accordingly.”
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