INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Interest on borrowed capital - Assessee purchased land stock -

AO made disallowance of interest expenditure claimed by assessee on the loan raised and utilized for purpose of purchasing stock in trade. Assessee submitted that it claimed interest expenditure incurred on the loan raised and utilized for purchase of land. Held: It was not in dispute that business operation of assessee for construction of NH5 was not commenced and it was only in a preparatory stage. For the assessment years 2010-11, 2011-12 and 2012-13, an identical issue came before this Tribunal. This Tribunal found that since business has not commenced, assessee could not claim the expenditure under section 37(1). Where the facts were similar to that of the assessment years 2010-11, 2011-12 and 2012-13, this Tribunal was of the considered opinion that claim of expenditure towards interest cannot be allowed as revenue expenditure.