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of <h1>Tribunal allows appeal on site expenses, adjusts interest rates, and approves factory building interest expenditure.</h1> The Tribunal partially allowed the appeal, dismissing the first ground of disallowance of advance site expenses due to lack of documentary evidence, ... Disallowance of advance site expenses - Held that:- We are of the view that the assessee is under obligation to provide the underlying documents and details for claim of expenditure if so required by the Revenue. Admittedly, the assessee has failed to produce all the documentary evidences to support the expenditure claimed on the ground that such bills/vouchers are purportedly voluminous. In the circumstances, in the absence of complete details, we do not find any plausible reason to discredit the findings of the CIT(A) in this regard. - Decided against assessee. Disallowance of interest expenditure - Held that:- While in view of the proviso to sub-section (iii) of section 36(1) of the Act, we find force in the alternate contention of the Assessee that interest attributable to the investment in new assets is required to be capitalized till the date the new assets is put to use, the rate of interest attributable to such advances is required to be applied @ 3%p.a. instead of 14% p.a. as per AO. The AO is accordingly directed to grant appropriate relief by computing the revised disallowance applying the rate at which the unsecured loans has been borrowed by the assessee. The AO may seek required details in this regard if he so considers it expedient.- Decided partly in favour of assessee. Disallowance of interest expenditure attributable to construction of the new building - Held that:- In view of the fact that unsecured loans of ₹ 6.65 crores bearing interest 3% p.a. is available with the assessee as claimed the benefit of low rate of interest as claimed by the assessee for the purpose of capitalization of interest costs in terms of section 36(1)(iii) of the Act cannot be denied. We therefore find force in the argument of the assessee. The AO is accordingly directed to apply the interest rate at which unsecured loan has been borrowed for the purpose of capitalization of interest cost in terms of section 36(1)(iii) of the Act. For this purpose, the AO would be entitled to may seek requisite information from the assessee. - Decided in favour of assessee. Issues:1. Disallowance of advance site expenses2. Disallowance of interest expense3. Disallowance of interest expenditure for the construction of a factory building4. Validity of the Commissioner's orderIssue 1: Disallowance of Advance Site ExpensesThe appellant contested the disallowance of Rs. 2,25,484 out of total advance site expenses claimed at Rs. 45,09,670. The appellant argued that the disallowance lacked basis, evidence, or specific findings. The Commissioner scaled down the disallowance from 10% to 5% without sufficient justification. However, the appellant failed to produce all necessary documentary evidence to support the claimed expenditure, leading to the dismissal of this ground.Issue 2: Disallowance of Interest ExpenseRegarding the disallowance of Rs. 1,11,183 of interest expense, the appellant claimed that the interest on advances for land purchase was not correctly calculated at 14% but should be based on a lower interest rate of 3% due to unsecured loans obtained. The Tribunal agreed with the appellant's contention and directed the AO to recalculate the disallowance using the 3% interest rate for the advances, partially allowing this ground.Issue 3: Disallowance of Interest Expenditure for Factory BuildingThe appellant challenged the disallowance of Rs. 15 lakhs related to interest expenditure for constructing a factory building. The appellant voluntarily offered Rs. 2,15,500 as a disallowance, but the AO capitalized Rs. 15 lakhs of interest based on incorrect assumptions. The Tribunal found that the AO should have considered the overall fund position and acknowledged the availability of unsecured loans at a lower interest rate. Consequently, the Tribunal directed the AO to apply the interest rate of the unsecured loans for capitalizing interest costs, allowing this ground.Issue 4: Validity of the Commissioner's OrderThe appellant contended that the Commissioner's order was contrary to the law and facts. However, this issue was not substantiated further in the judgment.In conclusion, the Tribunal partially allowed the appeal, dismissing the first ground, partially allowing the second ground, and fully allowing the third ground. The judgment highlighted the importance of providing complete documentation to support claimed expenses and correctly calculating interest expenses based on applicable rates.
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