Tribunal upholds assessee's claim for interest and depreciation, dismissing Revenue's appeal

The Tribunal dismissed the Revenue's appeal against the CIT(A)'s order for the assessment year 2012-13. It held that the disallowance of interest under section 36(1)(iii) was unjustified as the fixed assets were in use, allowing the assessee to claim depreciation and additional depreciation. The Tribunal upheld the CIT(A)'s decision, emphasizing that working at 20% capacity did not negate asset use. Therefore, the appeal related to interest disallowance and depreciation was dismissed in favor of the assessee.

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Issues Involved:
Appeal against order of CIT(A) for assessment year 2012-13 regarding disallowance of interest u/s 36(1)(iii) and addition of depreciation and additional depreciation.

Analysis:

1. Disallowance of Interest u/s 36(1)(iii):
The Revenue contended that the assets were not put to use, justifying the disallowance of interest paid on loans borrowed for acquiring fixed assets. The Assessing Officer based this disallowance on the lack of proof of machinery use, low capacity utilization, and advance payment to another company. However, the CIT(A) disagreed, stating that fixed assets were capitalized and in use. The Tribunal upheld this decision, emphasizing that working at 20% capacity did not negate asset use. The Tribunal ruled that once a business is ready to operate, depreciation can be claimed. As the assets were in use and no outstanding capital was in progress, the disallowance was unjustified. Therefore, the Tribunal dismissed the first ground of appeal.

2. Addition of Depreciation and Additional Depreciation:
The Revenue challenged the deletion of depreciation and additional depreciation. However, since the Tribunal found that the assets were indeed put to use, the assessee was entitled to claim depreciation and additional depreciation. Consequently, the Tribunal found no error in the CIT(A)'s decision to allow depreciation and additional depreciation. Therefore, the grounds of appeal related to depreciation were also dismissed.

In conclusion, the Tribunal dismissed the Revenue's appeal against the CIT(A)'s order, upholding the decision that interest disallowance was unwarranted as the assets were in use, entitling the assessee to claim depreciation and additional depreciation.

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