ITA No. 402 of 2008 1 In the High Court of Punjab and Haryana at Chandigarh ITA No. 402 of 2008 Date of Decision: 09.09.2008 Commissioner of Income tax, Ludhiana ...... Appellant Versus M/s Highway Cycle Industries Ltd., 698, Industrial Area-B, Ludhiana ...... Respondent Coram: Hon'ble Mr. Justice Adarsh Kumar Goel Hon'ble Mr. Justice Ajay Tewari 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? Present: Mr.Rajesh Sethi, Advocate for the appellant. **** Ajay Tewari, J. This appeal has been filed by the Revenue under Section 260 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') against the order dated 31.05.2007 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B' Chandigarh (hereinafter referred to as 'the Tribunal') in ITA No. 713/Chandi/2006 for the assessment year 2000-2001, proposing following substantial question of law:- 1. Whether on the facts and in law, the Hon'ble I.T.A.T. is right in law in allowing a deduction of Rs. 3,45,805/- being interest pertaining to a new business that came into operation in the subsequent Asstt. Year, from the income of the existing business, in the relevant Asstt. Year?” The assessee expanded its business by foraying into the manufacture of auto components after demerger w.e.f. 1.4.99. According to the Assessing Officer (A.O.) the commercial production started in December, 1999 and prior to the commencement of production the assessee ITA No. 402 of 2008 2 had shown interest paid relating to this expansion as revenue expenditure. According to the A.O. the interest paid on loan obtained for the expansion of business was required to be capitalised since new unit had not started production and he accordingly capitalised a sum of Rs. 3,45,805/-. The appeal filed by the assessee was dismissed by the CIT (Appeals). In second appeal the learned Tribunal reversed the finding and that is how revenue is before us. We find the matter covered by the decision of the Hon'ble Supreme Court in Deputy Commissioner of Income Tax v. Core Health Care Ltd., (2008) 298 ITR 194(SC) wherein the Hon'ble Supreme Court held as follows:- “The expression 'for the purpose of business' occurring in s. 36 (1)(iii) indicates that once the test of 'for the purpose of business' is satisfied in respect of the capital borrowed, the assessee would be entitled to deduction under s. 36(1)(iii). This provision makes no distinction between money borrowed to acquire a capital asset or a revenue asset. All that the section requires is that the assessee must borrow capital and the purpose of the borrowing must be for business which is carried on by the assessee in the year of account.” In view thereof we are of the opinion that the proposed question of law does not arise. The appeal is dismissed. (AJAY TEWARI) JUDGE (ADARSH KUMAR GOEL) JUDGE September 09, 2008 sunita