Komal Enterprises Vs ITO (ITAT Mumbai)
SECTION 36(1)(iii): OPEN LAND CAN WORK BEFORE THE GODOWN DOES—STORAGE-YARD USE &; SUFFICIENT OWN FUNDS DELETE ₹23.05 LAKH INTEREST DISALLOWANCE
Land purchased for storing heavy trading goods
The assessee, a partnership firm, was engaged in trading, import & consignment sale of tools, alloys, pipes, steel & scrap.
During FY 2011-12, it purchased Plot No. 13, admeasuring 3,741.83 sq. yards, at Cherlapally, Andhra Pradesh, for ₹2,01,12,560, including stamp duty. The property was acquired for constructing a godown & supporting the assessee’s trading operations.
During AY 2014-15, the assessee claimed interest expenditure comprising ₹15,12,841 paid on an HDFC Bank term loan & ₹7,92,611 attributable to an overdraft facility, aggregating to ₹23,05,452.
The AO disallowed the amount u/s 36(1)(iii), holding that borrowed funds had been utilised for acquiring the land & that the property had not yet been put to use.
AO treats incomplete construction as unused land
The assessee explained that the open plot was already being used for storing steel rods, pipes, steel scrap, tools & other bulky trading material.
Such goods required substantial open space for stacking, loading, unloading, parking of trucks & movement of forklifts. The plot was situated in an industrial area & had roads on three sides, making it commercially suitable as a storage yard.
