JCT LTD Vs. DEPUTY COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) These two appeals by the same assessee for the two respective asst. yrs. 1987-88 and 1988-89 involved identical question of law on identical facts. Therefore, these two appeals have been taken up together for disposal.

(2.) In the present case, the assessee who was already continuing with its business, had acquired certain machineries and plants for expansion of the units The payment for such plants and machineries was agreed to be in terms of Deferred Payment Scheme, which included interest. The question now arises is as to whether the interest paid on the borrowed capital, under a Deferred Payment Scheme for acquisition of plants and machineries until the plants and machineries are first put to use, could be deductible under Section 36(1)(iii) or Section 37 of the IT Act, 1961 in computing the assessee's income, as revenue expenditure, though capitalized in the account of the assessee, but on which the assessee did not claim depreciation or development rebate.

(3.) The AO had held against the assessee and charged the same to be a capital expenditure on which deduction under Section 36(1)(iii) or 37 was held to be impermissible. The CIT(A) affirmed the same. The Tribunal also agreed with the view taken by the CIT(A) and the AO. This view was taken also for earlier years (1986-87) following which the decision in 1987-88 and 1988-89 was given. After Mr. A.K, Roychowdhury had addressed the Court for a few days and the matter was hard-in-part successively, Dr. Pal came in aid of Mr. Roychowdhury and, in fact, the principal argument was advanced by Dr. Pal, crystallizing the submission of Mr. A.K. Roychowdhury. While Mr. M.P. Agarwal represented the Department and opposed the same.