Dy. Comm.of Income-tax, Jalgaon V. Om Narayan Industries and Developers Pvt. Ltd., Amalner

ITA 1680/PUN/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 66894 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 28-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K OJHA
• Keywords: Business expenditure; Revised return; Revenue expenditure; Capital expenditure
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI R.K. PANDA, ACCOUNTANT MEMBER. ITA.NO.1680/PN/2011 (ASSESSMENT YEAR 2007-08) DCIT, CIRCLE-2, C/O. INCOME TAX OFFICE, OLD. B.J. MARKET, JALGAON. .. APPELLANT VS. OM NARAYAN INDUSTRIES AND DEVELOPER PVT. LTD. PRATAP MILL COMPOUND, AMALNER - 425401. .. RESPONDENT PAN NO.AAACO 5960E ASSESSEE BY : SHRI SUNIL GANOO REVENUE BY : SHRI K.K.OJHA DATE OF HEARING : 12-04-2013 DATE OF PRONOUNCEMENT : 29-04-2013 ORDER PER SHAILENDRA KUMAR YADAV, JM : THIS APPEAL HAS BEEN FILED BY THE REVENUE ON FOLLO WING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) ERRED IN HOLDING THAT ASSESSING OFFICER MERELY RELIED UPON V ARIOUS ACCOUNTING STANDARDS IN DISALLOWING THE CLAIM OF THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS NOT APPRECIATED THE FACT THAT ASSESSEE HAS SHOWN THE SA ID LAND AS WORK IN PROGRESS AND NOT AS FINISHED GOODS WHICH ITSELF INDICATES TH AT THE LAND WAS NOT READY FOR ITS USE AND THEREFORE ACCOUNTING STANDARD-16 AND AC COUNTING STANDARD-2 WOULD NOT APPLICABLE IN ASSESSEES CASE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PVT. LTD. COMPANY AND IS ENGAGED IN THE BUSINESS OF PURCHASE OF LANDS, BU ILDINGS, MACHINERY. THE ASSESSEE HAS FILED ORIGINAL RETURN OF INCOME ON 12- 11-2007 DECLARING TOTAL INCOME AT RS.2,14,389/- WHICH WAS SUBSEQUENTLY REVI SED ON 11-09-2008 DECLARING TOTAL LOSS AT RS.1,72,55,135/-. THE ASSE SSING OFFICER HAD COMPLETED SCRUTINY ASSESSMENT U/S.143(3) ON 24-02-2 008 DETERMINING TOTAL INCOME AT RS.2,34,840/- DISALLOWING THE CLAIM OF AS SESSEES LOSS OF RS.1,74,69,524/- TOWARDS THE EXPENDITURE CLAIM IN R EVISED RETURN AS CAPITAL 2 EXPENDITURE INSTEAD OF REVENUE EXPENDITURE SHOWN BY THE ASSESSEE. THE ASSESSING OFFICER HAS GIVEN THE FOLLOWING REASONS F OR REJECTING THE ASSESSEES CLAIM. (A) 'THE ISSUE IS TO BE ANSWERED IS WHETHER IN THE CASE OF COMPANY WHICH HAS BOUGHT A LARGE TEXTILE MILL AT AMALNER IN 2001-02 AND DEMOLISHED IT SUBSEQUENTLY FOR DEVELOPMENT AND TO BE USED FOR RESIDENTIAL PURPOSE, WHETHER INTEREST CAN BE INCLUD ED IN THE INVENTORY COST OR NOT AFTER THE COMPANY HAS RECEIVE D PERMISSION FROM COLLECTOR STATING THAT IT CAN BE USED FOR RESI DENTIAL PURPOSE?' (B) THE COMPANY HAS INCURRED VARIOUS EXPENSES LIKE: (C) CLAUSE 12, OF AS-2, STATES THAT INTEREST AND OT HER BORROWING COST ARE USUALLY CONSIDERED AS NON RELATING TO BRINING THE INVENTORY TO THEIR PRESENT LOCATION AND CONDITION AND ARE THEREFO RE USUALLY NOT INCLUDED IN THE COST OF INVENTORY. HERE, ONE HAS TO ANALYZE THE WORDING I.E. USUALLY NOT INCLUDED IN THE COST OF INVENTORY. T HE COMPANY IS REQUIRED TO COMPLY THE ORDER OF COLLECTOR ALONG WITH TH E COMPLIANCES OF THE CONDITION LAID DOWN IN THE SAID ORDER FOR THE LAND B EFORE IT IS USED FOR RESIDENTIAL PURPOSE. THUS, THE AS-2, AND AS-16, ARE NOT APPLICABLE IN TH E CASE OF ASSESSEE COMPANY. THE AS-7 IS APPLICABLE TO THE ASSESSEE COM PANY AND THEREFORE THE INTEREST CLAIMED AS REVENUE EXPENDITUR E IS NOT CORRECT, THE SAME IS DISALLOWED AND ADDED BACK TO TOTAL INCOME. 3. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AU THORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF THE A SSESSEE AND CIT(A) HAVING CONSIDERED THE SAME ALLOWED THE CLAIM OF THE ASSESSEE. SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE. THE L D. DEPARTMENTAL ACCOUNT HEAD AMOUNT DEVELOPMENT EXPENSES 2,24,436/ - DEVELOPMENT EXPENSES BUNGALOW 17,74,470/ - ELECTRICAL REPAIRS 5,96,218/ - MUNICIPAL TAX 93,560/ - N. A. TAX 46,323/ - REPAIRS AND MAINTENANCE 1,18,348/ - ARCHITECT FEES 50,000/ - 3 REPRESENTATIVE SUBMITTED THAT ASSESSEE IN ORIGINAL RETURN OF INCOME ON 12- 11-2007 DECLARED TOTAL INCOME OF RS.2,14,389/- WHIC H WAS SUBSEQUENTLY REVISED ON 11-09-2008 OF LOSS OF RS.1,72,55,135/-. IN REVISED RETURN ASSESSEE CLAIMED EXPENDITURE ON ACCOUNT OF INTEREST OF RS.1,55,18,465/- AND RS.19,57,059/- ON ACCOUNT OF VARIOUS EXPENSES AS RE VENUE EXPENDITURE. WHILE FINALISING THE SCRUTINY ASSESSMENT THE ASSESS ING OFFICER TREATED THE EXPENDITURE OF RS.1,55,18,465/- AND RS.19,51,059/- AS CAPITAL EXPENDITURE. ACCORDING TO ASSESSING OFFICER AS-7 IS APPLICABLE T O ASSESSEE. THE AS-7 IS APPLICABLE TO THE ACCOUNTING FOR CONSTRUCTION CONTR ACT IN FINANCIAL STATEMENT OF CONTRACTORS WHEREAS AS PER AS-2 INTEREST COST DO ES NOT FORM PART OF INVENTORY AND AS-16, OF OPERATING COST INCURRED TIL L TIME OR IS READY FOR SALEABLE CONDITION SHOULD BE CAPITALISED. THE ASSES SING OFFICER HAS WRONGLY CLAIMED INTEREST OF RS.1,55,18,465/- AND AMOUNT OF EXPENDITURE OF RS.19,51,059/- AGGREGATING AT RS.1,74,69,524/- FROM WORK-IN-PROGRESS OF LAND AND CLAIMED AS REVENUE EXPENDITURE. THE ASSES SING OFFICER DENIED ASSESSEES CLAIM OF REVENUE EXPENDITURE. CIT(A) DE LETED THE ADDITION BY HOLDING THAT ASSESSEE CAPITALISED THE EXPENDITURE I NCLUDING INTEREST PAID ON BORROWED FUNDS TILL A.Y. 2006-07 AND THEN CLAIMED I T AS REVENUE EXPENDITURE WHEN PLOTS ARE AVAILABLE FOR SALE AFTER OBTAINING NECESSARY APPROVAL FROM STATE AUTHORITIES. DURING THE YEAR U NDER REFERENCE, PLOTS WERE READY FOR SALE AND SOME PLOTS WERE INFACT SOLD OUT AND ASSESSEE HAS SHOWN SALE PROCEEDS OF PLOTS. IN ITS RETURN THE AS SESSEE HAS PURCHASED THE PLOT AS ITS STOCK IN TRADE AND HAS BEEN SHOWING THE SAME UNDER HEAD CURRENT ASSETS. THE ASSESSEE OBTAINED LOANS FROM SBI FOR B USINESS PURPOSES. ACCORDINGLY, CIT(A) ALLOWED THE SAME. SIMILAR VIEW WAS TAKEN BY THE CIT(A) WITH REGARD TO THE EXPENDITURE OF RS.19,51,0 59/-. IN THIS BACKGROUND LD. DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT SINCE ASSESSEE 4 HAS SHOWN THE SAID LAND AS WORK-IN-PROGRESS AND NOT AS FINISHED GOODS WHICH ITSELF INDICATES THAT LAND WAS NOT READY FOR ITS USE AND THEREFORE ASSESSEE SHOULD HAVE CAPITALISED THE EXPENDITURE OF RS.1,74,69,524/- INSTEAD OF REVENUE EXPENDITURE CLAIMED IN REVISED RETURN. ACCORDINGLY, ORDER OF THE CIT(A) ON THIS ISSUE BE SET-ASIDE AND THAT OF ASSES SING OFFICER BE RESTORED. 4. ON THE OTHER HAND THE LD. AR SUBMITTED THAT ASSE SSING OFFICER WAS NOT JUSTIFIED IN TREATING THE ASSESSEE COMPANY AS C ONSTRUCTION COMPANY AND MISPLACED THE AS-7 IN THIS CASE. THE ASSESSING OFF ICER WAS NOT JUSTIFIED IN NON-ACCEPTANCE OF REVISED RETURN OF LOSS OF RS.1,72 ,55,135/-. THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING DEDUCTION OF INTEREST OF RS.1,55,18,465.48 BEING BUSINESS EXPENDITURE WHICH SHOULD HAVE BEEN FULLY ALLOWED. THE ASSESSING OFFICER WAS ALSO NOT JUSTIF IED IN DISALLOWING EXPENDITURE TO THE TUNE OF RS.19,51,069/- BEING EXP ENDITURE INCURRED FOR BUSINESS PURPOSES WHICH CAN BE FULLY ALLOWED. ACCO RDING TO THE LD. AR AS-7 IS APPLICABLE TO CONTRACTORS AND NOT TO DEVELO PERS. THE ASSESSEE COMPANY IS A DEVELOPER AND NOT CONTRACTOR, HENCE, A S-7 WAS NOT APPLICABLE TO THE ASSESSEE COMPANY. THE ASSESSING OFFICER FAI LED TO APPRECIATE THE CORRECT FACTS OF THE CASE. THE ASSESSING OFFICER W AS NOT JUSTIFIED IN DISALLOWING CLAIM OF INTEREST AND OTHER EXPENDITURE OF ASSESSEE CONSIDERING IT A CAPITAL EXPENDITURE. THE SAID EXPENDITURE WAS INCURRED IN RESPECT OF INTEREST AND OTHER EXPENDITURE EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF ASSESSEE. HENCE, IT WOULD CERTAINLY ALLOWABLE U/S. 36(1)(III) AND SECTION 37 OF THE INCOME TAX ACT, 1961. LD. AR BY DETAILED ARG UMENT SUPPORTED THE ORDER OF THE CIT(A). 5 5. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD WE FIND THAT THE MEMORANDUM OF ASSOCIATION OF ASSESSEE REVEALS THAT ASSESSEE COMPANY, I.E. OM NARAYAN INDUSTRIES AND DEVELOPERS PVT. LTD. WAS INCORPORATED FOR FOLLOWING MAIN OBJECTS : TO CARRY ON BUSINESS BY ACQUIRING BY PURCHASE, HIRE , LEASE LAND, BUILDINGS, STRUCTURE, MACHINERY INCLUDING LAND ESTATE OR INTEREST THEREIN, AND ANY RIGHT OVER OR CONNECTED WITH LAND AN D BUILDINGS AND DEVELOP IN PARTICULAR, BY PREPARING SITES AND/OR B Y CONSTRUCTING, RECONSTRUCTING, ALTERING, IMPROVING, FURNI SHING AND MAINTAINING HOTELS, WORKSHOPS, MILLS, FACTORIES, WAREHOUSE , COLD STORAGE, WHARVES, GODOWNS, OFFICES, HOSTELS, GARDENS, SWI MMING POOLS, PLAY-GROUNDS BUILDINGS, BY HIRING OR DISPOSING OF THE SA ME AS STATED ABOVE THE ASSESSEE COMPANY HAS PURCHASED ONE TEXTILE MILL NAMELY, PRATAP MILL ON 22-03-2002 FROM M/S. PRATAP SPINNING WEAVING AND MANUFACTURING CO. LTD. THE ASSESSEE COMPANY OBT AINED CLEARANCE FROM STATE GOVERNMENT CONVERTING THE LAND OF SAID COMPA NY FROM INDUSTRIAL ZONE TO RESIDENTIAL ZONE IN 2006. THE COMPANY HAD CAPITALIZED ENTIRE COST RELATING TO DEVELOPMENT OF LAND INTO PLOT TILL F.Y. ENDING 31-03-2006. THE PLOT DEVELOPED BY ASSESSEE COMPANY ON SAID LAND WER E READY FOR SALE IN A.Y. 2007-08. IT IS UNDISPUTED FACT THAT THE FIRST SALE DEED WAS EXECUTED ON 15-05-2006. THEREFORE, THE ASSESSEE REVISED ITS RET URN ON 11-09-2008 CLAIMING EXPENDITURE INCURRED ON DEVELOPMENT OF LAN D IN A.Y. 2007-08 INCLUDING INTEREST ON PART CAPITAL AS REVENUE EXPEN DITURE DURING THE YEAR UNDER APPEAL. THE RECORDS REVEALS THAT ASSESSMENT FOR A.Y. 2006-07 WAS COMPLETED U/S.143(3) OF INCOME TAX ACT ON 30-10-200 8 IN WHICH AO HAS ACCEPTED CAPITALIZATION OF THE EXPENDITURE. IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSE E HAS CLAIMED DEDUCTION OF EXPENDITURE INCLUDING INTEREST U/S.36(1)(III) AN D SECTION 37 OF THE ACT. IT IS NOT IN DISPUTE THAT ASSESSEES RETURN FOR A.YS. (I.E. 2002-03, 2003-04 AND 6 2004-05) HAVE BEEN FILED IN TIME. AS PER THE SEQUE NCE OF EVENTS FROM PURCHASE OF LAND TO SALE OF PLOT IS AS UNDER : (A) THE COMPANY HAS PURCHASED ONE TEXTILE MILL NAMED PRATAP MILL ON 22/03/2002 FROM THE PRATAP SPG. WVG AND MFG . CO. LTD. THIS IS DULY REFLECTED IN OUR ACCOUNT AS A BUSINESS IN COME. (B) THE SAID PROPERTY WAS UNDER INDUSTRIAL ZONE. TH EREFORE UNLESS AND UNTIL THE ZONE OF THE PROPERTY WAS CHANGED FROM INDUSTRIAL ZONE TO RESIDENTIAL ZONE OUR COMPANY COULD NO T HAVE DEVELOPED THE PROPERTY. UNDER CIRCUMSTANCES OU R COMPANY MOVED AN APPLICATION TO AMALNER MUNCIPAL COUNCIL FO R CHANGE OF ZONE FROM INDUSTRIAL TO RESIDENTIAL. (C) AFTER COMPLETION OF ALL FORMALITIES, GOVERNMENT OF MAHARASHTRA WAS PLEASED TO PASS AN ORDER ON 19/11/2003 CHANGING THE ZONE FROM INDUSTRIAL ZONE TO RESIDENTIAL. THEREAFTER, A LAYOUT OF THE PROPERTY WAS PREPARED B Y DIVIDING THAT LAND INTO SMALL RESIDENTIAL SALEABLE PLOTS AND THE SAME WAS SUBMITTED TO AMALNER MUNICIPAL COUNCIL WHICH WAS FORWARDED TO ASSI STANT DIRECTOR OF TOWN PLANNING FOR SUGGESTION. AFTER COMPLETE SCRUTI NY OF THE PROPOSAL ASSISTANT DIRECTOR OF TOWN PLANNING PASSED THE ORDE R ON 15/02/2005. THEREAFTER, THE CHIEF OFFICER OF AMALNER MUNICIPAL COUNCIL PASSED THE ORDER AND GRANTED THE APPROVAL FOR THE LAYOUT O N 10/06/2005. FURTHER, OUR COMPANY HAD FILED THE NA APPLICATION TO C OLLECTOR, JALGAON FOR CHANGING THE PURPOSE OF LAND AND COLLECTOR, JAL GAON WAS PLEASED TO SANCTION THE ORDER AND GRANTED NA PERMISSION ON 27/ 01/2006. MEANWHILE, AFTER APPROVAL OF LAYOUT FROM AMALNER MU NICIPAL COUNCIL, AN ADVERTISEMENT WAS PUBLISHED IN THE RENOWED NEWSPAPE R SUCH AS LIKMAT AND SACHOTI FOR THE BOOKING PURPOSES AND BOO KING OF THE PLOT WAS STARTED ON 08/07/2005. THE FIRST SALE DEED WAS EXECUTED ON 01/03/2006 IN FAVOUR OF JAGDISH C. AGRAWAL. FURTHE R, AMALNER MUNICIPAL COUNCIL HAD ALSO GIVEN BUILDING PERMISSIO N ON 15/05/2006. THUS THE ASSESSEE REVISED ITS RETURN ON 11-09-2008 GIVING FOLLOWING REASONS : THE CONCERN IS ENGAGED IN IN REAL ESTATE BUSINESS. THE CONCERN HAS PURCHASED ONE TEXTILE MILL NAMED PRATAP MILL AT AMALNER IN THE F.Y.2001-02.Z THE MAIN ACTIVITY OF THE CONCER N WAS TO DEVELOP RESIDENTIAL COLONY IN THE PREMISES. THE CONCERN HAS DEMOLISHED MAJOR STRUCTURE AND MACHINERIES. THE CONCERN HAS DEVELOPED LAYOUT AND THE SAID LAYOUT WAS AVAILA BLE FOR INTENDED SALE FROM MARCH 2006. THE PERMISSION OF THE COLLECTOR FOR DEVELOPING AND SELLING LAND WAS ALSO REC EIVED ON 17/02/2006 I.E. TO SAY THAT THE CONCERN HAS CAPITALIZ ED INTEREST COST FROM THE PERIOD F.Y. 2001-02 TO F.Y. 2 005-06. BUT WHEN THE GOODS WERE READY FOR INTENDED SALE THEN THE CONCERN COULD NOT HAVE CAPITALIZED INTEREST COST. CONSIDERIN G THE PROVISIONS OF SECTION 36(L)(III) OF THE INCOME TAX ACT 1961 AND ACCOUNTING STANDARD 2 AND 16 ISSUED BY THE INSTITUTE OF 7 CHARTERED ACCOUNTANT OF INDIA (AS PER SECTION 211(3 )(C) OF THE COMPANIES ACT 1956 IT IS MANDATORY FOR THE COMPANIE S TO COMPLY WITH THE ACCOUNTING STANDARD ISSUED BY THE IN STITUTE OF CHARTERED ACCOUNTANT OF INDIA). COMPANY CANNOT C APITALIZE THE INTEREST AMOUNT TO THE LAND ACCOUNT. DURING THE YEAR COMPANY HAS CAPITALIZED THE INTEREST AMOUNT TO LAND ACCOUNT. THE SAID WRONG VALUATION OF STOCK WAS RECTIFIED AND REVISED RETURN WAS FILLED. 6. THE ASSESSEE IN ITS REVISED COMPUTATION HAS REVI SED VALUE OF CLOSING STOCK (WORK-IN PROGRESS FROM RS.12,95,56,432/- TO 1 1,20,86,908/-) THE DIFFERENCE I.E. RS.1,74,69,522/- WAS ON ACCOUNT OF INTEREST OF RS.1,55,18,465/- ON BORROWED FUNDS AND RS.19,51,059 /- ON ACCOUNT OF EXPENDITURE (AFTER ADJUSTING SALE AND COST OF PLOTS ) INTER ALIA ON DEVELOPMENT, ELECTRIC REPAIRS, MUNICIPAL TAXES, N.A . TAX, REPAIRS AND MAINTENANCE OF ARCHITECT FEES ETC. THE ISSUE BEFOR E US IS WHETHER ABOVE AMOUNT OF RS.1,74,66,524/- IS TO BE TREATED AS REVE NUE EXPENDITURE AS CLAIMED BY THE ASSESSEE U/S.36(1)(III) AND SECTION 37 (1) OF THE ACT OR CAPITAL EXPENDITURE AS HELD BY THE AO IN HIS ASSESSMENT ORD ER. WE FIND THAT THE ASSESSEE HAS BORROWED FUNDS FOR THE PURPOSE OF BUSI NESS AND PAID INTEREST THEREON. THE ASSESSEE HAS CAPITALIZED THE EXPENDIT URE INCLUDING INTEREST PAID ON BORROWED FUNDS TILL A.Y. 2006-07 AND THEN C LAIMED IT AS REVENUE EXPENDITURE WHEN PLOTS WERE AVAILABLE FOR SALE AFTE R OBTAINING NECESSARY APPROVAL FROM STATE AUTHORITIES. DURING THE PREVIO US YEAR RELEVANT TO THE A.Y. 2007-08 PLOTS WERE READY FOR SALE AND SOME PLO TS WERE INFACT SOLD OUT AND ASSESSEE HAS SHOWN SALE PROCEEDS OF SAID PLOTS IN ITS RETURN OF INCOME. IN THIS BACKGROUND ASSESSEE HAS CLAIMED INTEREST AN D OTHER EXPENDITURE AS REVENUE EXPENDITURE UNDER THE PROVISIONS OF SECTION 36(1)(III). 8 THE NARROW ISSUE BEFORE US IS WHETHER INTEREST PAID ON BORROWED CAPITAL USED FOR BUSINESS WAS A REVENUE EXPENDITURE ONCE PL OTS WERE READY FOR SALE AND INFACT SOME PLOTS WERE SOLD DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE AO IS NOT JUSTIFIED IN DISALLOWING THE ENTIRE EXPENDITURE OF INTEREST WITHOUT COGENT R EASONING. THE ASSESSEE HAS PURCHASED THE PLOT AS ITS STOCK IN TRADE AND HA S BEEN SHOWING THE SAME UNDER THE HEAD CURRENT ASSETS IN ITS BALANCE SHEE TS SINCE INCEPTION. THE ASSESSEE HAS BORROWED THE FUNDS FOR THE PURPOSE OF BUSINESS. ACCORDINGLY, INTEREST PAID ON THE FUNDS BORROWED FOR BUSINESS PU RPOSES WAS TO BE ALLOWABLE AS REVENUE EXPENDITURE. THE ASSESSEE AS A DEVELOPER HAS USED THE BORROWED FUNDS FOR THE BUSINESS AND CLAIMED PAY MENT OF INTEREST AS REVENUE EXPENDITURE U/S.36(1)(III) OF THE ACT. THE AO WAS NOT JUSTIFIED IN DISALLOWING THE SAME AT THE STRENGTH OF SOME ACCOUN TING STANDARDS. THE LITMUS TEST FOR DISALLOWANCE OF INTEREST AS DEDUCTI ON IS THAT BORROWED FOUND SHOULD BE FOR PURPOSE OF BUSINESS. IN VIEW OF THE ABOVE, THE AO WAS NOT JUSTIFIED IN IGNORING THE REVISED RETURN OF INCOME AND CIT(A) HAS RIGHTLY ALLOWED DEDUCTION OF RS.1,74,69,524/- INCLUDING EXP ENDITURE AMOUNTING TO RS.19,51,059/- ON VARIOUS ACCOUNTS. SAME IS UPHELD . 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 29 TH DAY OF APRIL, 2013. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER SATISH DATED THE 29 TH APRIL 2013. 9 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-II, NASHIK 4. THE CIT-II, NASHIK 5. THE DR B BENCH, PUNE. 6. GUARD FILE BY ORDER // TRUE COPY // PRIVATE SECRETARY, INCOME TAX APPELLATE T RIBUNAL, PUNE.