Manjunatha G. ORDER
Manjunatha G., Member (A)
1. This appeal filed by the assessee is directed against order passed by the learned Commissioner of Income Tax (Appeals)-12, Chennai dated 28.11.2018 and pertains to assessment year 2015-16.
2. The assessee has raised following grounds of appeal:-
"1. The order passed by the Commissioner of Income Tax-Appeals 12 for the Assessment Year 2015-16, is contrary to law, evidence and facts and is arbitrary.
2. The Learned Commissioner of Income Tax, Appeals, had failed to comprehend that the interest paid amounting to Rs. 64,25,874/-on the loan availed from M/s Fullerton, does not qualify for disallowance u/s 36(1)(iii) of the Act, and the provisions have been invoked and applied in an erroneous manner.
3. The Learned Commissioner of Income Tax, Appeals has also grossly erred in not appreciating that the new mandapam, representing a different though identical business/vertical, would not amount to extension of the existing business to invoke sec. 36(1)(iii), and hence the addition is erroneous and arbitrary.
4. The Learned Commissioner of Income Tax, Appeals , has also erred In not appreciating that there was total unity of control and interlacing of capital.
5. The Learned Commissioner of Income Tax, Appeals, has also erred in not appreciating that the expenditure also qualifies for consideration on the grounds of commercial expediency u/s 37(1) of the Income Tax Act."
3. Brief facts are that the assessee firm M/s. Sri Mak & Co., has filed its return of income for the assessment year 2015-16 on 30.09.2015 declaring total income of Rs. 1,31,50,650/-. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has claimed huge interest expenses to the tune of Rs. 2,80,52,927/-, therefore, the assessee was asked to furnish details regarding interest payments and purpose for borrowing of loans. In response, the assessee submitted that firm has borrowed loan from M/s. Fullerton India amounting to Rs. 11,19,40,000/-and paid interest of Rs. 1,26,29,967/-. The said loan has been taken for the purpose of construction of new mandapam in the name of M Weddings & Conventions. The construction of building was completed and building was ready for use. Therefore, the assessee has claimed interest paid on said loan. The Assessing Officer, however, was not satisfied with the explanation furnished by the assessee and according to the Assessing Officer, building has been inaugurated only in February, 2016 and started booking from financial year 2016-17 and therefore, argument of the assessee that building was ready for use is not correct. Therefore, the Assessing Officer invoked provisions of section 36(1)(iii) of the Act and disallowed interest paid on loan borrowed for construction of new mandapam of Rs. 64,25,874/-and added to total income of the assessee .
4. Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee has filed detailed written submissions on issues which has been extracted at para 6.3 on page 6 to 12 of the learned CIT(A) order. The sum & substance of the arguments of the assessee before the learned CIT(A) are that when business of the assessee has been commenced and the assessee has acquired new asset for expansion of existing business in the same line of business, then interest paid on borrowed capital is to be allowed as deduction. The learned CIT(A), after considering the submissions of the assessee and also taken note of certain judicial precedents opined that as per provisions of section 36(1)(iii) and proviso provided therein, interest on capital borrowed for acquisition of new asset cannot be allowed till........