COMMISSIONER OF INCOME TAX Vs. VARDHMAN POLYTEX LTD.

JUDGEMENT

(1.) PASSED by the Income -tax Appellate Tribunal, Chandigarh Bench 'A' (for short 'the Tribunal'), for the asst. yr. 1992 -93 :

(2.) THE provisions relevant for consideration on the issue are extracted below : Sec. 36. Other deductions. - -(1) the deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing referred to in s. 28 - -

(3.) THE undisputed facts in the present case are that the assessee, who was already continuing with its business at Ludhiana, started setting up of a new unit at Baddi (HP) for which the loans were raised from financial institutions on which the assessee was liable to pay interest besides payment of upfront fee. The new unit being set up at Baddi (HP) had not yet come into commercial production. The question for consideration in the present case is as to whether interest paid on borrowed capital for setting up of a new unit till such time it comes into commercial production, is deductible as the revenue expenditure under s. 36(1)(iii) of the Act while computing the income of the assessee or to be treated as capital expenditure to be added to the cost of asset.