COMMISSIONER OF INCOME TAX Vs. AMRIT SOAP CO.

JUDGEMENT

(1.) THE Revenue has preferred this appeal under s. 260A of the IT Act, 1961 (the Act) against the order of the Tribunal, proposing to raise the following substantial questions of law : "(i) Whether on the facts and law, the Hon'ble Tribunal was legally justified to allow interest on capital borrowed for construction of building during the pre -operative period within the meaning of Expln. 8 to s. 43 of IT Act ? (ii) Whether on the facts and law, the Hon'ble Tribunal was legally justified to allow interest @ 18 per cent to close relatives and associated persons covered under s. 40A(2)(b) as compared to the rate of 15 per cent paid to other creditors -

(2.) THE AO has disallowed the claim for deduction under s. 36(1)(iii) of the Act on account of interest paid on the capital borrowed for establishing a new unit. It was held that as per Expln. 8 to s. 43 of the Act, the interest paid for pre - operative expenses was not admissible. The AO also disallowed interest amount of Rs. 1,66,229 to persons covered under s. 40A(2)(b) of the Act on the ground that the same was excessive.

(3.) THE CIT(A) allowed the claim of the assessee which order has been confirmed by the Tribunal.