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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -11, Chennai, dated 29.06.2017 and pertains to assessment year 2013-14.
The only issue arises for consideration is disallowance of interest payment of ₹35,47,273/-.
Shri M. Karunakaran, the Ld.counsel for the assessee, submitted that the assessee is running a hospital. During the year under consideration, according to the Ld. counsel, the assessee borrowed ₹7 Crores from HDFC Bank for construction of another hospital at Halls Road, Chennai. On this loan, the assessee has paid interest of ₹35,47,273/- during the year under consideration and claimed the same as revenue expenditure. According to the Ld. counsel, the Assessing Officer found that the project at Halls Road was not commenced during the year under consideration, therefore, he disallowed the claim of the assessee. The CIT(Appeals) also confirmed the disallowance on the ground that the expenditure on payment of interest is capital in nature.
According to the Ld. counsel, the assessee is in the business of running hospital. To expand its existing business, a loan was borrowed from HDFC Bank and interest was paid as business expenditure. When the loan was borrowed for expansion of existing business, according to the Ld. counsel, it cannot be said that the interest is a capital expenditure.
We heard Shri N. Gopikrishna, the Ld. Departmental Representative, also. According to the Ld. D.R., the project at Halls Road, Chennai is a new project, therefore, unless it commences its operation, the expenditure cannot be allowed. Moreover, it was also not established whether the borrowed funds were invested in the Halls Road project. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the order of the Assessing Officer.
We have considered the rival submissions on either side and perused the relevant material available on record. The Assessing Officer at para 4 of his order has found that the assessee borrowed loan of ₹7 Crores from HDFC Bank for construction of another hospital building at Halls Road, Chennai and paid interest on that loan to the extent of ₹35,47,273/-. Therefore, the contention of the Ld. D.R. that the assessee has not established the investment of loan for construction of building at Halls Road is not correct. In fact, the Assessing Officer himself admitted that the loan was for the purpose of construction of another hospital at Halls Road. Moreover, the assessee is in the business of hospital. Therefore, the construction of another hospital building is only an extension of existing business. Hence, the loan borrowed from HDFC Bank is for the purpose of business, therefore, the expenditure of payment of interest to the extent of ₹35,47,273/- is only a revenue expenditure. Hence, we are unable to uphold the orders of both the authorities below. Accordingly, orders of both the authorities below are set aside and the addition made by the Assessing Officer to the extent of ₹35,47,273/- is deleted.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on 3rd July, 2018 at Chennai.